Canadian Underwriter January 2010

C A N A D A’ S I N S U R A N C E A N D R I S K M A G A Z I N E . C A N A D I A N U N D E R W R I T E R . C A

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J ANUARY 2 0 1 0 A Business Information Group Publication #40069240

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Catastrophic Ambiguity BY VANESSA MARIGA

Crash and Burn By Fred Plant

Facing the Facts By John Young and Jennifer M. Malchuk

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VOL. 77, NO.1, JANUARY 2010 CANADA’S INSURANCE AND RISK MAGAZINE. PUBLISHED BY BUSINESS INFORMATION GROUP

www.canadianunderwriter.ca

COVER STORY

Catastrophic Ambiguity Ontario's pending auto insurance reforms await clarification regarding "catastrophic" auto injuries. Court and arbitration decisions have muddied the picture somewhat, allowing psychological and physical impairments to be merged in the determination of a “whole body impairment.” BY VANESSA MARIGA

FEATURES

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Serious Injury Specialists Crash Course Ontario's adjusters are working with the Insurance Institute of Ontario and the Insurance Bureau of Canada to improve training of adjusters in the art of handling serious auto injuries.

Successful collision repair centres focus on continuous improvement, resulting in reduced cycle times for insurers and shorter wait times for consumers.

BY NORMAN MCGLASHAN

BY NORM ANGROVE

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The Canadian government has increased competition in the auto collision repair marketplace, which should help to control insurers' repair costs over the long run. BY SCOTT SMITH

20 Fighting Fraud

BY FRED PLANT

Facing Facts

50 Lakefront Exposure A recent court decision will require waterfront cottage owners to examine whether their actions have increased the likelihood of injury on their property.

BY JAMES DUNN

Canada's independent adjusters are planning to reinvent themselves by focusing on better communication with each other, industry partners and the public.

Small and medium enterprises (SMEs) are no less at risk of liability than their larger counterparts, so why aren't more SMEs buying D&O insurance? BY JOHN BARCLAY

A Canadian TV series about Canadian case law is fleshing 42 Managing Credit A recent survey by provincial Hamilton adjuster Jimmy Burn out the rules when it comes BY JOHN YOUNG AND JENNIFER M. MALCHUK insurance regulators reveals wastes an opportunity to educate to using Facebook as a tool to that most insurers are not the public about the honourable investigate insurance claims. BY JOHN YOUNG AND JENNIFER MALCHUK telling their customers about world of insurance adjusting.

Facing the Facts

BY RANDY CARROLL

BY NADIA MACPHEE

58 Catastrophic Ambiguity Crash and Burn

how credit scores are affecting their insurance purchases.

How to fight fraud without falling into the trap of a "bad faith" claim.

28 No Small Potatoes

BY VANESSA MARIGA

Crash and Burn

12 Right to Repair

54 Metamorphosis

BY PATTI KERNAGHAN

62 Annus Horriblis, Part II A cluster of so-called ‘mini-cats’ dominated the headlines in 2009. Alas, timing is everything: the events of 2009 occurred during a year of poor financial performance for the insurance industry. BY GLENN MCGILLIVRAY

BY FRED PLANT

January 2010 Canadian Underwriter

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VOL. 77, NO.1, JANUARY 2010

PROFILE

10 Variations on a Theme OIAA president Norman McGlashan expects 2010 to feature discussion on how to train Ontario's adjusters in handling serious auto injuries.

Editor David Gambrill david@canadianunderwriter.ca (416) 510-6796

Art Director Gerald Heydens Art Consultation Pylon.ca

Associate Editor Vanessa Mariga vanessa@canadianunderwriter.ca (416) 510-6793

Production Manager Gary White (416) 510-6760

Senior Publisher Steve Wilson steve@canadianunderwriter.ca (416) 510-6800

Subscriptions/Customer Service Gail Page gpage@bizinfogroup.ca (416) 442-5600 ext 3549

Associate Publisher Paul Aquino paul@canadianunderwriter.ca (416) 510-6788

Circulation Manager Mary Garufi mgarufi@bizinfogroup.ca (416) 442-5600 etx 3545

Account Manager Michael Wells michael@canadianunderwriter.ca (416) 510-5122

Print Production Manager Phyllis Wright

BY DAVID GAMBRILL

SPECIAL FOCUS

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Editorial

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Marketplace

66 Moves & Views 68 Gallery

Advertising Sales Christine Giovis christine@canadianunderwriter.ca (416) 510-5114

President Bruce Creighton Vice President Alex Papanou

Canadian Underwriter is published thirteen times yearly (monthly + the Annual Statistical Issue) by Business Information Group, a division of BIG Magazines LP, a leading Canadian information company with interests in daily and community newspapers and business-to-business information services. Business Information Group is located at 12 Concorde Place Suite 800, North York, ON, M3C 4J2. Phone: (416) 442-5600. Canadian Underwriter, USPS 022-494. US office publication: 2424 Niagara Falls Blvd., Niagara Falls, NY 14304-0357. Periodicals Postage Paid at Niagara Falls, NY, USA. US postmaster: Send address corrections to Canadian Underwriter, Po Box 1118, Niagara Falls, NY 14304. All rights reserved. Printed in Canada. The contents of this publication may not be reproduced or transmitted in any form, either in part or in full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. Š Published monthly as a source of news, technical information and comment, and as a link between all segments of the insurance industry including brokers, agents, insurance and reinsurance companies, adjusters, risk managers and consultants. Privacy Notice From time to time we make our subscription list available to select companies and organizations whose product or service may interest you. If you do not wish your contact information to be made available, please contact us via one of the following methods: Phone: 1-800-668-2374 Fax: 416-442-2191 E-mail: jhunter@businessinformationgroup.ca Mail to: Privacy Officer, 12 Concorde Place., Suite 800, North York, ON, M3C 4J2 Subscription Rates: 2009 Canada 1 Year $35.95 plus applicable taxes 2 Years $56.95 plus applicable taxes Single Copies $10 plus applicable taxes Annual Statistical Issue (included with above subscription) or separately $38 plus applicable taxes Elsewhere 1 Year $42.00 2 Years $68.00 3 Years $95.00 Subscription Inquiries/Customer Service Gail Page (416) 442-5600 ext 3549 gpage@bizinfogroup.ca

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EDITORIAL

The Drumbeat of Fraud

Lawmakers should be encouraged to give insurers legislative tools to tackle insurance fraud. David Gambrill, Editor david@canadianunderwriter.ca

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Canadian Underwriter January 2010

It’s common knowledge that hard insurance markets — typically featuring higher premiums and tighter coverage — correlate with an increased incidence of fraud, as consumers try to find a way to claim as much as they can from a system with tightening purse strings. By its very nature, fraud is difficult to quantify. Various estimates suggest that between 15% and 30% of all claims submitted to insurance companies contain at least some trace element of fraud. Presumably, this would include the age-old practice of “padding” claims — i.e. guessing too high on values for lost or stolen items, for which receipts are incomplete or are not available. To put this into perspective, let’s go with the lower number on the scale, the 15% fraud figure that the Insurance Bureau of Canada (IBC) put forward back in 2005. Let’s apply that number to the Cdn$21.5 billion that Canada’s federally regulated insurance companies paid out for net incurred claims in 2008. That would make fraud a lucrative, Cdn$3.2-billion cottage industry in 2008. Imagine what consumers might save on their insurance premiums if a significant minority started to claim exactly what the value of the lost or stolen item was worth (I realize there is a lot of fogginess around the concept of “value”). Alas, too many do not. Why not? The answer is simple: they can get away with it. Put simply, there is so much evidence of potential fraud in the

system, claims departments will too frequently lack the time, money or resources required to thoroughly investigate, detect and eradicate it. And no matter how thorough they may be, investigators often confront a legal system that requires mountains of paperwork to prove fraud, and face trial lawyers who are quick to read “bad faith” into any unsuccessful attempt to prove fraud. There is even case law on the books in which judges say “padding” a claim is an ordinary practice that doesn’t necessarily prove fraud. “Some leeway must be made in allowing for puffery or establishing a negotiating position,” wrote one Ontario judge cited as an authority in insurance fraud cases. To make matters worse, the federal Privacy Commissioner’s expanding authority over insurance fraud investigations is having the unintentional effect of giving fraudsters an additional layer of protection. Insurance fraud investigators cannot undertake a number of typical investigatory procedures because federal privacy rules require a person’s “consent” for collecting their private information. Some investigation tactics should be exempted from the federal privacy rules, since investigations are by their very nature an adversarial way to gather information pertaining to fraud — an illegal activity — that no fraudster in their right mind would ever voluntarily disclose to an insurance company. Alas, this idea seems to have died on Parliament’s order paper.

If insurance companies can’t root out the less spectacular forms of fraud, maybe they should seek help. The question is: From whom? StatsCan says 46% of insurance companies experiencing fraud don’t report the fraud to police. Why? Police are just as swamped with their other regular duties as the insurance companies; it often isn’t worth their time to prosecute minor forms of fraud. As one observer put it: “These crimes have no emotional tie to the general population. They are faceless, victimless crimes and hence there is no impetus for lawmakers or law enforcers to do anything about it.” And so the drumbeat of fraud continues to sound. And yet, this is not a “faceless” crime. We are all victims of insurance fraud through higher insurance premiums. And so it’s time to tackle this issue head-on instead of simply ignoring it. Lawmakers should be encouraged to give insurers legislative tools to tackle insurance fraud, much in the same way the government passed legislation aimed specifically at the whitecollar crime of money-laundering. The new legislation should review and, if necessary, re-define the legal concept of “bad faith.” If insurance companies show due diligence and make an honest mistake in not being able to prove fraud, they should not have to worry about “bad faith” claims. Bad faith is about being malicious, not merely wrong. Our insurance premiums down the road will thank us for such efforts.

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Claims SUPREME COURT THROWS OUT CAP CHALLENGE The Supreme Court of Canada will not hear a challenge to Alberta’s $4,000 cap on minor auto injuries, meaning a central piece of the province’s 2004 auto reform will be allowed to stand. “We are pleased the Supreme Court of Canada has decided not to hear this case, therefore finally putting to rest any questions about the constitutional validity of Alberta’s auto insurance system and helping ensure auto insurance remains affordable and accessible for Albertans,” Alberta Minister of Finance and Enterprise Iris Evans said in a statement. The Insurance Bureau of Canada says the Supreme Court of Canada’s refusal to hear an appeal against the province’s $4,000 minor auto injury cap is “good news for Alberta motorists,” and will open the door for a future review of the province’s overall 2004 reform package. “We can move on and deal with the government on a number of other important matters relating to auto insurance that were frozen or on hold until these things were resolved, so we’re excited about the future of making the product in Alberta even better,” says IBC vice president, general counsel and corporate secretary Randy Bundus.

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Canadian Underwriter January 2010

Bundus said the IBC is now ready to talk to the Alberta government about a couple of aspects of the 2004 reform package, including a review of the province’s treatment protocols and alternatives to the province’s annual, industry-wide adjustment process.

NOVA SCOTIA APPEAL COURT UPHOLDS CAP LEGISLATION The Nova Scotia Court of Appeal has upheld the province’s $2,500 cap on minor auto injury claims, finding on Dec. 15 that the cap is not discriminatory. In Hartling v. Nova Scotia (Attorney General), the Court of Appeal determined that although the province’s cap legislation “disadvantaged” minor injury claimants (in the sense that they can now collect only $2,500 for injuries for which they previously could have collected more), the presence of disadvantage did not necessarily mean there was discrimination under the Charter. The court found the purpose of the legislation, which is to control escalating auto insurance costs, accommodated the needs, capacities and circumstances of minor injury victims. For example, although the non-monetary damages of minor injury victims were capped at $2,500, victims nevertheless have recourse to a variety of other, monetary awards. These include “claims for wage loss and other out-of-pocket expenses;

the costs of future care; or, where a wrongdoer’s actions are particularly egregious, ‘aggravated’ or ‘punitive’ damages, together with a commensurate contribution towards the victim’s legal bill,” the court wrote.

was too minor (34%) or that it was handled in some other way (33%),” the StatsCan study says. The full report can be found at: www.statcan.gc.ca/dailyquotidien/091210/dq091210ceng.htm.

INSURERS UNDER-REPORTING FRAUD: STATSCAN

Canadian Market

Insurance companies beset by fraudulent claims are under-reporting the fraud to police, according to a Statistics Canada report, Survey of Fraud Against Businesses. The StatsCan report is based on a survey covering about 7,500 business establishments and head offices from the retail, banking, health and property insurance sectors. The study found just under half (about 45%) of health and property insurance establishments reported experiencing fraud in 2008. More than three-quarters (77%) of all fraud incidents related to these businesses involved false or inflated claims. Of the individual health and property insurance establishments experiencing fraud, about seven in 10 reported financial losses as a consequence. And yet, despite the scope and impact of the reported fraud, the study found 46% of all health and property insurance establishments in the survey never or rarely contacted police in cases of fraud. “Overall, the most common reasons for not contacting police were that the incident

PROVINCIAL REGULATORS ASK FOREIGN INSURERS TO SIGN VOLUNTARY UNDERTAKING RELATED TO PART XIII Canada’s provincial insurance regulators are asking foreign insurers to sign a common undertaking outlining how the signatories are expected to conduct their business following the Office of the Superintendent of Financial Institution (OSFI)’s Part XIII amendments. The insurers’ decision to sign the undertaking is purely voluntary. The failure to sign will not be sanctioned. Provincial regulators say the common undertaking is designed “in an effort to mitigate the confusion that might result from foreign insurers dealing with each [provincial] regulator separately” subsequent to the implementation of OSFI’s Part XIII amendments. The full wording of the undertaking, plus supporting documentation, can be found at the CCIR Web site at: http://www.ccirccrra.org/CCIR /Ptxiii_UTing/index_en.h

MARKETPLACE

ALBERTA-REGULATED INSURERS SELL MORE PREMIUM, BUT CLAIMS RATIOS INCREASE Provincially regulated property and casualty insurers in Alberta wrote Cdn$8.04 billion in premium in 2008, marking an increase from 2007’s Cdn$7.5 billion, according to the Superintendent of Insurance’s Annual Report. The direct claims ratio in 2008 rose to 61.3% from 56.9% in 2007. Automobile claims ratios increased year-over-year — from a 61.3% claims ratio in 2007 to 73.4% in 2008. Property remained flat at 63.7% in 2007 to 63.4% in 2008.

governing mortgages and the federal regulation of banks, essentially taking the position that the provincial Insurance Act did not have jurisdiction in this case and, therefore, the case should be thrown out of the Ontario court.

Ontario Superior Court Justice David Crane relied upon the Supreme Court of Canada’s 2007 decision in Canadian Western Bank v. Alberta in finding that the case should be tried under Ontario’s Insurance Act. In Canadian Western Bank,

the Supreme Court of Canada ruled that promoting insurance is not a core function of banking, so provincial legislation that regulates insurance agents also applies to federally regulated banks when it comes to promoting creditors’ insurance.

Cunningham Lindsey offers expert claims handling for the most complex and specialized losses. To access our team of experts, write to us at corpservices@cl-na.com for a copy of our new Specialty Services Directory.

Regulation BANKS INVOLVED IN INSURANCE ARE SUBJECT TO PROVINCIAL INSURANCE LAWS: ONTARIO COURT Ontario banks that promote or accept applications for insurance products are subject to the province’s Insurance Act, Ontario’s Superior Court of Justice has ruled. In Royal Bank of Canada v. Salih and Mirsada Mujagic, Salih and Mirsada Mujagic made a number of allegations, including “negligence misrepresentations as to the nature and quality of the insurance promoted at the [RBC’s] branch.” RBC did not fully respond to the allegations. Instead, the bank relied on the law

www.cunninghamlindsey.com

January 2010 Canadian Underwriter

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PROFILE

Variations on a Theme David Gambrill Editor

OIAA president Norman McGlashan entered the claims business on a promise of variety, but when it comes to serious auto claims, he’s hearing variations on a theme. Ontario Insurance Adjusters Association (OIAA) president Norman McGlashan entered the adjusting profession in the early 1990s based on his interest in an infinite playlist of claims and cases; one decade later, he is hearing variations on a theme. That theme is split licensing, which the Ontario government started to look into in 2002. The idea was to split adjuster’s licenses to better reflect the specialist knowledge required to handle auto insurance accident benefits claims. At that time, McGlashan was adjusting accident benefits claims for AXA Canada in

10 Canadian Underwriter January 2010

Toronto, and he also did work in the company’s catastrophic claims unit. The adjuster’s license was not split after 2002. “There was talk of it,” McGlashan said. “We discussed it, but the Financial Services Commission of Ontario [FSCO] ultimately did not do anything formal to split the license. I guess more information was needed at the time to make a proper decision.” Fast forward to 2010: McGlashan is now at Crawford & Company (Canada) doing third-party administration and risk management in the area of commercial auto claims. Once again, FSCO and the Ontario government want to discuss the fact that adjusters handling serious and catastrophic cases require specialized training to show they have the expertise to handle claims for seriously injured claimants. “In accident benefit claims, the rules are always changing,” McGlashan said of the difference between then and now. “Where we’re at now, we may be at a point where it’s something that we have to do.” The Ontario government recommended in November 2009 that: “Insurance claims de-

partments need to better focus on the needs of claimants with serious injuries. The Insurance Bureau of Canada, Insurance Institute of Ontario and the Ontario Insurance Adjusters Association could work together to train adjusters on the needs of claimants with serious injuries to reduce expo-

Basic claims are a good way to learn how to negotiate with the insureds, lawyers and other insurance companies. sure to potential allegations of unfair and deceptive acts or practices.” These discussions will no doubt dominate the OIAA’s focus during McGlashan’s term as president in 2010. McGlashan said the OIAA has already started ongoing discussions with the IBC and Insurance Institute about how to train adjusters to handle serious auto injuries. The OIAA does not have a formal position on the split licensing question and nothing has been

carved in stone, but certainly the issue is on the table for discussion. As it stands now, the OIAA committee on which McGlashan now sits has sent a survey to members to canvass opinion on how adjusters would like to receive any potential training related to serious auto injury claims, if it were to be offered. In many ways, McGlashan’s career experience in adjusting auto claims has trained him well for these discussions. He started adjusting basic auto claims for Allstate in 1990, when a friend told him there were jobs available to those with a university degree. McGlashan had a degree in Political Science and History, and was lured to join Allstate because he liked the sound of the variety that comes with adjusting insurance cases. “I did everything,” he said. “I started at the basic auto claims — basic automobile accidents and repairs to vehicles. And even though those are the most basic claims, now that I've done everything, I realize they are a good way to learn how to negotiate with the insureds, with lawyers and with other insurance companies.”

Certainly the political skills came in handy for the negotiation part of the job. Sometimes it's easier for an adjuster to settle a multi-million-dollar auto insurance claim than it is to convince an insured that their policy covers only a portion of their $1,000 claim. For example, the insured’s car may be 15-20 years old and have well over 100,000 kilometres on it, but as an adjuster “you’re dealing with the insured and he’s saying: ‘I just put new tires on, painted it, I just put a $2,000 stereo in there.’” McGlashan said, painting a picture. “It’s their only mode of transportation, they drive it to work every day, and they’re looking at receipts in front of them for $5,000, $6,000 or $7,000 worth of work that’s put into a car that’s worth only $500. There’s no way those numbers are ever going to match. Those are the hardest negotiations of all.” In those situations, it’s tough for an adjuster to say to the insured that the policy will cover a new paint job for a single door, but not a paint job for the entire car. “Those were the hardest negotiations ever, and it pre-

Photo: Erin Thompson

PROFILE

pares you for everything else,” McGlashan said. McGlashan has been handling these types of auto claims situations steadily since he first started with Allstate in 1990. About four years later, an opportunity

came up to do accident benefit claims full-time at Pilot Insurance, where he worked until about 1998. “And then an opportunity came up to do fulltime road claims at Crawford, so I did my first stint at Crawford in 1999,” he said.

In 1999-2000, McGlashan moved to Axa Canada to do accident benefits claims for a company “in a bit more centralized area,” he recalled. Five years later, he went to Sedgwick Claims Management Services (CMS) to move into commercial claims, third-party administration. He continued this line of work in commercial auto when he moved back to Crawford in 2007. McGlashan first came to the OIAA in 2002 while he worked for AXA Canada in Toronto. The OIAA’s past president at that time, Paul Feron of ClaimsPro in London, Ontario, was responsible for recruiting qualified delegates to the association. He discovered McGlashan through Laurie Walker (the OIAA’s immediate past president), who was the OIAA’s London delegate at the time. Walker knew McGlashan through her work for AXA in London, She suggested to Feron that McGlashan would be a good Toronto delegate. Feron and Walker met with McGlashan and AXA's regional manager Sharon Clark; together, they convinced McGlashan to become an OIAA delegate.

January 2010 Canadian Underwriter

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Right to Repair Scott Smith

Director of Government and Industry Relations, Automotive Industries Association of Canada (AIA)

Canada’s auto manufacturers have acknowledged the aftermarket has a right to certain information required to repair vehicles, making life easier for insurers and their policyholders. A competitive collision repair marketplace has returned, which is good for the insurance business and good for consumers. Access to diagnostic and repair information is a complex problem without an easy solution. Some vehicle manufacturers were restricting the access to factory-specific tools, training and diagnostic and repair software from independent installers, preventing them from repairing latemodel vehicles. By signing an agreement referred to as the Canadian Automotive Service Information Standard (CASIS), Canadian automobile manufacturers finally acknowledged the aftermarket has the “right to repair” vehicles. Signed on Sept. 29, 2009, the agreement between the aftermarket and all car companies that sell vehicles in Canada1 will open access to original equipment manufacturer (OEM) tools and information to the aftermarket. By now, most people in the repair community have likely heard of the right to repair issue through the introduction of Bill C-273 in the House of Commons in January 2009.The bill has

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now been withdrawn, although its introduction clearly served a purpose: politicians acknowledged in the House in October 2009 of this year that the agreement between the car companies and the aftermarket was the result of legislative pressure.

THE AUTOMOTIVE AFTERMARKET The automotive aftermarket is a $19-billion industry in Canada, employing more than 410,000 people who service close to 20 million vehicles. In 2008, there were 337 OEM car and truck make/model combinations and more than 850 series in Canada, requiring an overwhelming diversity of tools, information and training needed by automotive service providers. Independent repair shops or garages made up the largest segment of the ‘do-it-for-me’ (DIFM) service channel in 2006, reaching 40.7% of the overall market. New car dealers, on the other hand, accounted for 32.5%. The aftermarket is therefore an important link in maintaining a competitive market place. There are roughly 6,000 collision repair facilities in Canada; only a fraction of these are directly associated with a dealer. The vast majority of dealerships (88.2%) are located in designated urban areas. Of the 416 dealerships represented in rural areas, 383 are Ford, GM or Chrysler franchises —91% of the total. Dealership service to drivers in rural areas is therefore limited.

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The agreement to share information between the dealers and the aftermarket has now levelled the playing field. In particular, it gives the aftermarket access to information for repairing key technologies found in most vehicles today, including flash reprogramming and on-board diagnostics.

KEY REPAIR TECHNOLOGIES Flash reprogramming Although it means many things, the right to repair issue can be boiled down to one central, key ingredient — flash reprogramming. While the aftermarket still has many channels to access much of the information and tools required to repair today’s vehicles, the growing information gap for aftermarket service professionals is primarily software-based. Much like the operating system of a PC, the calibration files of an Engine Control Module (ECM) are updated from time to time to ensure ideal performance as the vehicle ages. These improvements, provided by the vehicle manufacturers, are often related to fuel economy, driveability and diagnostics. Before the introduction of flash technology, technicians in most cases would be forced to replace the entire ECM with one that had an updated calibration. With the introduction of flash technology, the technician can simply update the ECM’s calibration electronically, without removing the ECM from the vehicle or its programmable memory. Currently, every manufacturer has their own method, but generally it involves three components: OEM software and data, a personal computer and a pass-thru device (either an OEM scan tool or an aftermarket interface). On-board diagnostics Collision repair centres also sought access to tools that would help them repair a vehicle’s electronic systems such as On-Board Diagnostics. Most vehicles today use On-Board Diagnostics II (OBDII), a standard of systems introduced in the mid-90’s. OBD II systems have evolved to allow for almost complete 14 Canadian Underwriter January 2010

engine control and monitoring parts of the chassis, body and accessory devices, as well as the diagnostic control network of the vehicle. Modern OBD systems use a standardized fast digital communication port to provide myriad real-time data, in addition to a standardized series of diagnostic trouble codes (DTCs) that allow someone to identify and remedy malfunctions with the vehicle rapidly. Significant increased use of electronics in cars is further expected in planned upgrades and innovations in safety, emission, comfort and entertainment.

A competitive collision repair marketplace has returned, which is good for the insurance business and good for consumers. Looking ahead to 2010, it is expected that 40% of the cost of a new vehicle will be in its electronic systems and related diagnostic support.

IMPACT ON INSURERS Have insurers given any thought as to how the right to repair issue might affect their business? The picture starts to form by taking a look at just a few key product categories. For example, by 2006, sales of aftermarket ECM-related parts were stagnant or declining, although they shouldn’t have been. As a result, vehicle repairs were being subleted to dealers because collison repair shops did not have the option to repair the vehicles themselves. Also, the option did not exist to associate with aftermarket shops as an alternative to dealers for many of the mechanical repairs necessary after a collision. This was limiting competition and driving up the price of repairs. Your customers were at risk. So were you as insurers. The insurance industry is one of the largest single consumers of automotive repair services when one considers the collision repair industry. Many of the mechanical repairs required that result

from collisions require access to service and repair information and factoryspecific tools.This access will be universally available to the aftermarket repair community (parts manufacturers, distributors and repairers) once the CASIS Agreement comes into force on May 1, 2010, reversing what was rapidly becoming a distinct market disadvantage. Consider the following benefits of a more competitive marketplace: • cost of parts decreases due to improved competition; • cost of labour decreases due to increase in competition; • distribution of OEM dealer repair channels is limited, as evidenced by AIA dealer study. The availability of a more diversified aftermarket parts offering improves with the broader marketplace; • wait times are reduced with the larger available bay capacity of aftermarket retail outlets to perform similar functions; • turnaround time (cycle time) decreases due to fewer outsourcing requirements; • duplication of services from having two shops perform one repair is reduced; • the liability that results from repairs undertaken when flash reprogramming is required but not performed is reduced; and • the likelihood that other vehicles on the road continue to drive with underperformed maintenance is reduced. Essentially, consumer choice is as important for the insurance industry as it is for the average consumer. Improving productivity at the collision shop level, reducing the duplication of services, reducing the liability of underperformed maintenance and potentially reducing (or at least capping) labour inputs will all serve to improve the collision repair business and by extension, the insurance industry.With the “right to repair” issue now settled, everyone can get back to the business of serving customers. 1 The reference to “all” car companies refers to mass-market brands and does not include exotic car manufacturers with limited exposure to the Canadian marketplace.

Contractor Connection is part of The Crawford System of Claims Solutions.SM

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Crawford Contractor ConnectionSM is Crawford’s managed repair network, providing the industry with a quick, efficient and customizable performance-managed system. Premier customer service delivery is Contractor Connection’s top priority. We offer reliable and credentialled contractors operating on a five-point quality assurance program and an estimate review process which provides cost efficiencies and the best value to our clients. Contractor Connection will provide enhanced customer satisfaction, indemnity management and time-in-process, as all facets of the repair are tracked and managed in real-time in our state-of-the-art management system. Crawford will be launching this innovative service at the OIAA conference in Toronto on February 3, 2010. Visit us at booth #803 to learn more, or contact us anytime at ContractorConnection@crawco.ca. www.contractorconnection.com

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Trained to Help

Norman McGlashan

President, Ontario Insurance Adjusters Association (OIAA)

The Financial Services Commission of Ontario (FSCO), which regulates the insurance industry in Ontario, completed its mandatory review of PartVI of the Insurance Act and submitted its recommendations to the Minister of Finance in March 2009. The Ontario Ministry of Finance adopted several of FSCO’s recommendations in its proposed changes to the Ontario auto insurance product, which the government announced in November 2009. One of these adopted proposals, Recommendation 35 in FSCO’s report, will have a direct affect on the province’s adjusters. In this article, I will discuss the implications of Recommendation 35, as well as the Ontario Insurance Adjuster Association (OIAA)’s position on the recommendation. Basically, the province has deemed that the OIAA should have a direct

16 Canadian Underwriter January 2010

role in the training of adjuster to handle catastrophic cases properly.

BACKGROUND Ontario’s legislature amended the province’s Insurance Act in 2003 to change Section 289.1.With that new change, FSCO’s superintendent was given responsibility to review Part VI of the act, as well as any regulation therein, at least once every five years — or more often if requested by the minister of finance. The superintendent is obliged to report back to the government on how the Act is working and provide recommendations on changes to improve the act for Ontarians if they are needed.To prepare for its report, FSCO started consulting with various stakeholders in the summer of 2008. The stakeholders were made up of a diverse group, with different levels of experience and perspective. Among the participants were insurers, insurance professionals, defence and plaintiff lawyers, health care providers, consumers, municipal authorities and brokers. Many of FSCO’s recommendations were based on the

Illustration by Matthew Daley/www.threeinabox.com

Ontario’s adjusters are currently discussing how best to train in the technique of adjusting catastrophic auto injury claims.

Bell Canada, a wholly owned subsidiary of BCE Inc., to incur substantial debt. The BCE board accepted an offer valued at $52 billion, representing a 40% opinions by the stakeholders. premiumprovided on the trading price of BCE FSCO’s final document, submitted to shares at the relevant time. BCE Inc.’s board the minister of finance, touched on the members believed the offer was in the profitability ofof theBCE property casualty best interests and its and shareholders. insurance sector and the trend of finan-of Although an overwhelming 97.93% cial results — including how the BCE’s shareholders approved the2003 offer, reforms affected the cost of losses in the the plan of arrangement was strongly first year after reforms, how loss opposed by the a group of and financial and costs have trended since. The superinother institutions that held debentures istendent in debenture 2009 thatholdinsued by commented Bell Canada.The creasing loss costs and the current levels ers argued that the actions of the board ofinrate increases are not an equalif accepting the offer wereon oppressive: pace.The industry as a whole has seenthe a the sale proceeded, they observed, year of declining profitability, lower short-term trading value of the debenearnings and higher Without realof tures would declinecosts. by an average changes to could stabilize claims costs 20% and losecosts, investment grade will continue to accelerate. status.The debenture holders brought an oppression action under section 241 of the CBCA.They suggested the tests found The OIAA expects endrequiring in section 192 of thethe CBCA, court approval for a change in corporate result to be accreditation. In structure, could not be met, thereby other words, certificate, desprecluding the a takeover. ignation diploma The trialor judge agreed will with identify BCE, finding that the company was at liberty to specialized individuals trained proceed with the transaction.The Quebec and qualified to handle serious Court of Appeal, on the other hand, found that the actions of the board were injury cases. oppressive. BCE Inc.’s directors ought to have considered a planthe of government arrangement To address this trend, thatannounced not only provided a satisfactory price has 41 proposals to bring to the shareholders, but also avoided an back auto insurance product stability.The adverse effect on the debenture holders, recommendations cover all aspects of the appellate court ruled. insurance in Ontario from accident benefit to tort claims; consumer protection DIRECTOR’S toApremium costs.DUTIES The report addresses The SupremeofCourt of Canada set the the availability insurance to the general stage for decision by providing an public, the its dispute resolution process, overview of directors’ duties generally. public education and managing claims An essential component a corporainvolving serious injured of claimants. I tion turn is its capital divided into fracnow to the stock, role of the adjusting tional parts in known as “theclaims shares.”While community managing involvtheserious corporation is ongoing, shares coning auto injury claimants. firm no right into its underlying assets. A share not an isolated piece of propOIAA ANDisTRAINING ertypoint but aemphasized bundle of interrelated rights One in FSCO’s March and liabilities. These rights include the 2009 report is the overwhelming comright to a proportionate part of the assets plexity of the province’s auto insurance of the corporation uponofwind-up, and system. However, many the recomthe right to oversee the management mendations submitted by the stakehold-of thetocorporation by itsinboard directors ers fix the system fact of add to its by way of votes at shareholder meetings. complexity.

The directors are subject to two duties: a fiduciary duty to the corporation and a duty to exercise the care, diligence and skill of a reasonably prudent person in The OIAA received a copy of FSCO’s comparable circumstances. report, reviewed the document andtodisThe fiduciary duty of directors the cussed it over several of our monthly corporation, and particularly the fair meetings. immediately in treatment We component of this focused duty, is funon Recommendation 35, which directly damental to the reasonable expectations involves our association. of the stakeholders claiming an oppresRecommendation 35 reads: “Insurance sion remedy. claims need to better focus The departments fiduciary duty of directors to act

in the best interests of the corporation is mandatory. Although the interests of shareholders and other stakeholders are often coextensive with the interests on the corporation, needs of claimants serious of the if they with conflict, the injuries. The IBC, Insurance Institute of director’s duty is clearly to the corporaOntario and the Ontario Insurance Ad1 tion first. justers Association should together In considering the bestwork interests of to train adjusters on the needs of the corporation, the directors may look claimants with serious to reto the interests of theinjuries shareholders, duce exposure to potential allegations of employees, creditors, consumers, governunfair acts or practices.” ments and anddeceptive the environment, among

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17

In our OIAA meetings, we discussed the main parts of Recommendation 35.

OIAA ROLE IN TRAINING

%

The first question we asked was: Is there a role for the OIAA in training of adjusters? Yes, there is, and the OIAA definitely wants to be involved. Our mandate as an organization is to be a leading educator of our members and to adjusters in general in Ontario. We expect our magazine, Without Prejudice, to be perceived as a reference tool for adjusters. When adjusters come across an unusual claim on their desks, we would like them to remember an article they recently read in our magazine and go back to that issue for the answer. In addition, our annual February Claims Conference and Professional Development day is the largest of its kind. It is a day full of seminars for adjusters across all insurance lines.

members, allowing us to learn from them about what areas of training they feel are needed and how to best deliver the training. We provide regular educational seminars for our members across the province. We have a close working relationship with our vendor partners,

PARTNERSHIP IN TRAINING Secondly, we asked: Do adjusters handling serious injury cases need more training? We have many accident benefit adjusters among our membership; several members of our executive handle mainly accident benefit claims. After talking to our members and executive members who work in all regions across the province, we concluded that more training is indeed required. The training should be a team effort with two other organizations mentioned in the report: the Insurance Bureau of Canada (IBC) and the Insurance Institute of Ontario (IIO). Our next step was to reach out to these two organizations and obtain their input; we have since put a committee together consisting of members of all three organizations to produce combined ideas on the training. Each organization has different areas of strength. The IIO has locations across the province available to be used for in-class lessons. They have an extensive library of course material that could be used or adapted for our purposes. At the OIAA, we have our membership list and various ways to communicate to our

18 Canadian Underwriter January 2010

The goal of the training is to produce adjusters with the expertise necessary to quickly identify the services available to seriously injured claimants and to deliver those services promptly. including health care providers who can provide input on subject matter and lecturers from among from among their ranks. The IBC has a roster of member insurance companies whose staff makes up the majority of the adjusters in the province. The trade association thus has a strong working relationship with decision-makers at the insurance companies.

METHODS AND OBJECTIVES If we are going to train adjusters, we must determine the best method to deliver the training. The range of different options is wide. There could be full-or

half-day formal classroom sessions, correspondence courses, Webinars or in-house training at the insurance companies, to name a few. To obtain the thoughts of our membership, we sent out a survey to all of our members, asking them to comment on the best method of training that suits their needs. Based on comments made by FSCO’s stakeholders and the language of the government’s proposal itself, the goal of the training is to produce adjusters with the expertise necessary to quickly identify the services available to seriously injured claimants and deliver those services promptly. Adjusters should be able to identify required assessments; also, their timing should be on the mark when it comes to assessing the nuances of each individual case. In addition, adjusters must have the right claim count in order to deal with these cases correctly. Having the right claim count will help to reduce the turnover of adjusters on these files and keep these specialized individuals on staff to mentor up-and-coming adjusters as they start to handle more complex accident benefit cases. Our organization expects the end result will be accreditation. In other words, a certificate, designation or diploma will identify specialized individuals who are trained and qualified to handle serious injury cases. Our next step in conjunction with the IIO and IBC is to determine what materials are required, how they should be delivered and who will deliver the material. We also have to consider funding for the production of course material and to retain the professionals required to teach adjusters the skills needed to handle complex accident benefit cases confidently. Our research is ongoing. We are looking at internal and external training in the community.We do not need to reinvent or start a new form of education if resources in the community already exist that we can leverage for our purposes and for the benefit of our members, adjusters in general and the general public as a whole.

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Absence of

Malice How to investigate suspicious claims without drawing accusations of “bad faith.”

James (Jamie) E. Dunn Partner Blouin Dunn LLP

Insurance fraud is an expensive and growing problem in our industry. Statistics show that in 2005, out of the Cdn$20 billion paid out in property and casualty claims, between 20% and 30% contained some element of fraud.That’s $4 billion to $6 billion dollars. The incidence of fraudulent claims measured in 2005 is almost double the 15% figure of claims containing some element of fraud reported more than a decade ago by the Insurance Bureau of Canada. Unfortunately, many Canadians don’t see insurance fraud as a serious problem. A poll conducted by the Canadian Coalition Against Insurance Fraud revealed that 46% of Canadians believed it was easy to submit fraudulent claims; 5% said “padding” a claim was acceptable. Incredibly, appellate courts in both Nova Scotia and Ontario have recently confirmed that there is nothing wrong with an insured overstating the value of a claim by approving the following statement of law: “I doubt that there are many Proofs

20 Canadian Underwriter January 2010

of Loss filed in insurance claims that are exactly accurate. Some leeway must be made in allowing for puffery or establishing a negotiating position. When it is determined that the claimant is indeed indulging only in puffery or in attempting to establish a negotiating position, fraud should not be imputed to the claimant.

PROVING FRAUD The Supreme Court of Canada established the following test for proof of fraud in a 1924 civil case: “Fraud is proved when it is shown that a false representation has been made 1) knowingly, 2) without belief in its truth or 3) recklessly, carelessly whether it be true or false.” Canadian courts continue to cite this test as the accepted standard for proof of fraud, although it can be difficult to prove.There are virtually no reported decisions in which fraud has been proven on the basis of recklessness or carelessness. Practically speaking, fraud must be proven to have been committed intentionally. Most provinces have legislation permitting courts to provide an insured with relief from forfeiture in situations where the claim details may not be entirely accurate.This is often used as

a convenient technique to circumvent a legitimate denial of a fraud claim that cannot be strictly proven.

THE RISKS The “swing” value of a fraud case is large. Appeal courts in both British Columbia and Ontario have recently held that nothing is to be awarded to a plaintiff if “any” aspect of the claim is proven fraudulent, even if part of the claim is legitimate. On the other hand, unproven allegations of fraud can lead to significant punitive damages awards for bad faith claims handling. In the 2002 Whiten v. Pilot Insurance Co. decision, the Supreme Court of Canada upheld the jury’s $1million punitive damages award against Pilot in a situation in which it failed to prove the insured had committed arson. However, the high-risk nature of fraud claims should not dissuade an adjuster from investigating, assessing and even denying a suspicious claim. Proper company policies and claims-handling practices can reduce the exposure to a bad faith/punitive damages result.

and obtain a non-waiver or deliver an adequate reservation of rights letter. Otherwise, it may be estopped from denying the claim at a later date. The retention of independent adjusters, investigators, police personnel and lawyers will often be necessary. The claims handler must be willing and able to assess objectively each piece of new information generated by hired experts. The outside experts must be capable of

providing honest and unbiased reports; they must also be strong enough to tell the claims handler that, in their opinion, the fraud cannot be proven. The claims handler has to be willing to listen to and accept that advice even when he/she is passionately committed to the “fraud” position. Frequent peer, supervisor, claims committee and senior management review of your file at different stages of the claim

PCA Adjusters We Investigate We Negotiate We Settle

OBJECTIVE INVESTIGATION Experienced claims handlers and crime investigators agree their first hint of a fraudulent claim generally involves a gut feeling or instinct that something is not right.The importance of that early, subjective feeling cannot be overemphasized. However, it is more important to have an objective, claims-handling framework within which the examiner can gather the evidence to prove the fraud. A company-wide, claims-handling protocol with pre-determined procedures and guidelines can prevent missteps and avoid a subsequent allegation of the adjuster being “out to get” the insured claimant. Obtaining a non-waiver agreement or a reservation of rights letter is often a prudent step. Indeed, it may be a legal requirement when the claim is expected to be denied. In Rosenblood v LSUC, the court said in a case of questionable coverage, the insurer should advise the insured “at once” that it is investigating

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21

process is strongly recommended. The retention of an independent claims professional to do a file review or to attend at mediation or pre-trial conference can also be an effective strategy.

IDENTITY OF THE PERPETRATOR The insurer must prove the insured committed the fraud. For example, in a car theft claim in which the police recovered an insured’s Porsche in an entirely stripped condition, the insurer suspected fraud when a salvage purchaser put the exact same tires on the Porsche that were claimed to have been stolen. The court concluded that there was fraud involved. Nevertheless, the insurer still had to pay the insured’s claim because there was insufficient proof that the insured himself was involved in the fraud.

CREDIBILITY OF THE INSURED The claims-handling strategy in a suspected fraud case has to focus on the in-

sured. A successful defence will depend on whether the insured’s credibility can be destroyed. In Ontario, trial judges have been directed by the Court of Appeal to make specific findings of credibility for the insured claimant and to provide reasons for either accepting or

Poor claims handling can quickly turn fraud claims into bad faith claims. Courts expect insurers to investigate and assess claims in a balanced, objective and reasonable way. rejecting the claim on that basis. In the recent case of Sagl v Cosburn et al., the Ontario Court of Appeal directed a new trial solely because the trial judge failed to consider the issue of the insured’s credibility adequately. So start early and focus on the insured. Interview witnesses. Retain experts to

do forensic testing.Take a detailed statement from the insured and get production of documents from the insured. Do Internet searches. Social networking sites such as Facebook and Twitter provide valuable information enabling you to assess a claimant’s credibility. The law in this area is still developing, but as of the time of this writing, the court can order to be produced during the discovery phase disclosure of information on a private Facebook site.The earlier this information can be accessed, the better. Plaintiff’s counsel are well aware how damaging this information can be to their client’s case. If deletion of information is expected, then a timely legal consultation is recommended.

DOCUMENT PRODUCTION AND MANAGEMENT Poor claims-handling practices can quickly turn fraud claims into bad faith claims. Courts expect insurers to inves-

tigate and assess claims in a balanced, objective and reasonable manner; they expect insurers to make decisions based on evidence, not suspicion or innuendo. Be aware that your entire file may be subject to production at some point during the litigation. Be careful about what you write in your notes. You can think bad thoughts, just don’t record them in your file. Make sure hired independents understand that their files, including notes and e-mails, may be subject to production and scrutiny as well. Hire reputable independents, individuals who will make good witnesses at trial. In Ontario, every “relevant” document must be produced to a claimant once litigation is commenced. Exceptions fall within two main categories. Litigation privilege applies to documents created when litigation was a reasonable prospect at the time, and if the “dominant” purpose of the production or obtaining the document was to assist in the litigation. Solicitor-client privilege

applies to documents sent between a client and a lawyer for the purposes of obtaining or providing legal advice. There are constant challenges to claims for documentary privilege.The obvious hope is that your opponent will uncover the “smoking gun.” This was most

There is no ‘bad faith insurance claim’ exception to either litigation privilege or solicitor-client privilege. The same privilege rules apply in all cases. recently demonstrated in the 2009 case of Kavanagh v.Peel. In this bad faith claim, the insurer’s lawyer provided at least one legal opinion on the merits of the insurer’s position in the lawsuit. Despite the insurer’s claim the document was solictor-client privileged, the insurer was ordered to produce the opinion to the

insured. A lower court said the trial judge should be entitled to determine whether the insurer was acting in good faith in light of a possible legal opinion stating that there were no good grounds to continue the denial of the claim. The lower court decision was overturned on appeal. Specifically, the appeal judge held: “There is no ‘bad faith insurance claim’ exception to either litigation privilege or solicitor-client privilege that creates a special rule for bad faith claims against insurers and consigns the normal rules respecting privilege to other claims.The same rules apply in all cases.” Of course, those “same rules” have some exceptions. Notably, if a plaintiff can show the insurer had engaged, on the face of it, in actionable misconduct, the court may still order the disclosure of privileged documents. Don’t allow a claimant’s counsel to access your privileged documents by referring to them in non-privileged documents.

When you’re not FirstOnSite, who is?

Fred Plant

President, Plant Hope Adjusters Ltd.

A Canadian T.V. series featuring a struggling Hamilton adjuster, Jimmy Burn, wastes an opportunity to educate the public about the country’s honourable insurance adjusting profession. Anyone even remotely associated with the property and casualty insurance industry in Canada is keenly aware of the current and deepening personnel crisis affecting that industry.The segment of the industry with which I am most familiar and where I believe the situation is most critical is claims — from top to bottom.There has been a great deal of discussion and some positive action is being taken. But the response is so far behind the curve, there will be a great deal of poor

24 Canadian Underwriter January 2010

claims service — and with that, diminished consumer confidence in the industry — before there is any improvement. Against this backdrop, I learned in early November 2009 that Showcase would later that month begin airing Cra$h & Burn, a new 10-part series based on the life of an insurance adjuster. At first I was excited about the program’s potential, believing — naively, as it turns out — that the show might be a positive vehicle by which to spread the word about the many positive elements of a career in loss adjusting.

DEPARTURE FROM REALITY But my optimism quickly faded. As I reflected back on my 30 years in loss adjusting, I tried to recall aspects of my own professional experience that would cause television viewers to want to tune in for an hour each week to be entertained by leaking roofs, flooded basements and burntout kitchens in which the central issue is that the

Illustration by Matthew Daley/www.threeinabox.com

Popular Culture Review

C r a sh & Burn

new cupboards don’t match the old ones. I soon learned that my experience as an adjuster in New Brunswick was not going to compare to the life of Hamilton-based adjuster Jimmy Burn, the central character in the Cra$h & Burn series. Not even a little bit. In fact, each of the three episodes I struggled to watch took me further from reality and deeper into a fantasy world that was not only completely detached form any sense of reality, it was not even remotely entertaining. Perhaps I was watching with a critical eye regarding the actual function of the loss adjuster. After all, adjusting is the premise of the show; if it is not at all realistic, then the whole thing could just as well be about plumbing

The work of a loss adjuster is not glamorous. It is often demanding. It is definitely frustrating at times and it can challenge even the most patient. Working through those situations to produce amicable results is perhaps where the true nature of loss adjusting fails on the screen. or dentistry. Unfortunately the show’s producers, including Paul Gross of Due South, Men With Brooms and most recently Passchendaele fame, didn’t pick on plumbing or dentistry. How I wish they had! I do not pretend to know the first thing about the entertainment industry, beyond the fact that it often produces things that are less than entertaining. But this is not intended to be critique of the entertainment industry. Therefore I will stick to my thoughts on the impact of Cra$h & Burn on the property and casualty insurance industry in Canada. My emotions on this have gone from the aforementioned excitement when I fist heard of the series to downright disappointment when I actually watched the first of the shows. That disappointment

26 Canadian Underwriter January 2010

deepened with each successive viewing, to the point that I have admittedly only watched three episodes. I can only hope that others who were drawn to the program by the “adjusting” premise didn’t go any further than me. Fortunately the

more aware of adjusting; that will be a good thing, so long as most viewers see this show as an attempt to entertain rather than educate. Every adjuster should be aware of Cra$h & Burn and be prepared to respond to the comments that are inevitably going to be made by insureds, claimants, cocktail party participants and even your friends. It is human nature to look for the worst in things; for the profession of loss adjusting, it does not get much worse than Cra$h & Burn. And yet, professional adjusters are the backbone of our industry. They should take pride in the important role they play in keeping the insurance industry viable.This series will soon fade into the darkness and with it will fade its negative impact on the honourable adjusting profession.

HONOURABLE WORK

Cra$h & Burn depiction of the life of an insurance adjuster, complete with guns, mob figures and underhanded dealings, is so far removed from reality that anyone with the requisite intelligence to be an adjuster will see it for what it is and not be influenced by the wholly unrealistic portrayal of the profession. Dreamers who actually come knocking in quest of becoming a real-life Jimmy Burn — or worse, aspire to the role of Jimmy’s equally unreal boss Dick DiMaio — will be quickly redirected back to their video games.

THE IMPACT OF CRA$H & BURN Thus I do not believe Cra$h & Burn will cause any negative impact on the effort of the industry to attract new people to a career in loss adjusting. But I am not so sure about the impact of the series on consumers in general and, in particular, on consumers who are predisposed to think the worst about all things “insurance” based on preconceived notions and misinformation. The overall impact of the show may be to make people

The work of a loss adjuster is not glamourous. It is often demanding. It is definitely frustrating at times and can challenge even the most patient. At the same time, it is one of the most satisfying careers in any industry. Every day, adjusters are presented with new cases of distress

Dreamers who actually come knocking in quest of becoming a real-life Jimmy Burn — or worse, aspire to the role of Jimmy’s equally unreal boss Dick DiMaio — will quickly be redirected back to their video games. and conflict.Working through those situations to produce amicable results is very satisfying; that is perhaps where the true nature of loss adjusting fails on the screen. Who would want to watch a program where there are almost always happy endings? For that, we are going to have to wait for a Disney production on the life of an adjuster. Surely dentists and plumbers are higher on their list. Until then, keep it real.

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No

Small

Potatoes

John A. Barclay President, Simmlands Insurance Brokers Ltd.

Small and medium-sized, privately owned companies in Canada face several of the same management exposures as larger corporations, and yet many don’t purchase Directors and Officers (D&O) liability insurance. Why not? The corporate landscape in Canada has often been characterized as one dominated by small and medium enterprises (SME). In fact, there are about 2.3 million SMEs in the country and they employ approximately two out of every three Canadians in the private sector, according to Statistics Canada.

28 Canadian Underwriter January 2010

SMEs are defined as enterprises with fewer than 500 employees. Small enterprises have less than 99 employees; medium enterprises have between 100 and 499 employees, while micro enterprises are those with fewer than five employees. In Canada, SMEs account for about 60% of all new jobs created in the private sector. It’s clear that SMEs are an important engine of Canada’s economy. Less clear is why so few of them buy management protection in the form of Directors and Officers (D&O) or Employment Practices (EPL) liability insurance. Several studies show the take-up rate of management liability protection amongst SMEs has been slow. Canadian data is scarce, but a recent survey by Chubb Insurance found 37% of U.S. companies do not purchase any type of management liability insurance. In a survey of private companies, the majority of survey participants (63%) did not

buy directors and officers liability or employment practices liability insurance. Based on our experience, the similar trends seem likely to apply in Canada. Smaller privately owned companies may think their exposure to management liability risk is low or negligible, but that is not necessarily the case. In fact, another study by Chubb Insurance Company of Canada showed private firms both here and south of the border face similar rates of: • lawsuits against their directors and officers; • legal action involving general management liability; and • lawsuits from their customers. In a survey released in September 2008, Chubb discovered private companies in Canada and the United States faced similar lawsuits from customers

Several studies show the takeup rate of management liability protection amongst small and medium enterprises has been slow. In a survey of private companies, 63% did not buy D&O or EPL insurance. (16%), competitors (5%), vendors (6%) and partners or shareholders (3%) in the last five years.The average cost to the affected Canadian companies was $338,699. One-third of Canadian companies and almost a quarter of U.S. firms experienced an employment-practices related incident in the last five years. Judgments, settlements, fines and legal fees for such incidents cost affected

companies an average of $63,724. So you have a slow uptake of liability protection and management exposures for SMEs in Canada.The result: an insurance coverage gap for an alarming number of privately held companies.

WHY SMALL COMPANIES DECLINE PROTECTION There are many reasons why SMEs tend to decline management liability protection. The first is that most D&O policies are written with the larger corporation in mind. As the old adage says: if you’re a hammer, then everything looks like a nail. Many privately held companies say the application process is too cumbersome and the information requirements too broad.The second is that SMEs tend to perceive the price as too high. Again, this “one-size-fits-all” approach has been a problem with some traditional

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SM

Brokers in Canada should be interested in the SME market because of the importance of small commercial clients to their practices. Although many of these clients likely have a CGL policy in place, a significant proportion do not have management liability protection. D&O and management liability policies. Underwriters design products, applications and business processes around larger risks, with publicly traded companies, shareholder lawsuits and audit controls in mind. But many privately held corporations don’t have the same risk profile. Some SMEs may feel they are not exposed to management liability, but in reality the exposure is simply different for a privately held company. For example, instead of public shareholders, the issue of lawsuits is far more likely to involve partners or private shareholders. SMEs also tend to have fewer internal control mechanisms — such as human resources or compliance officers and company protocols — than larger corporations. In addition, they are more vulnerable when negotiating with vendors or large suppliers, since the SME is typically the smaller of the two parties. Moreover, privately held companies are likely to face short-term cash flow issues, which is reflected in relatively higher bankruptcy rates for small businesses.

SME EXPOSURES The bottom line is that SMEs can, and do, face a number of liability issues related to directors and officers and employment practices. Executive and non-executive business owners are increasingly being held accountable for

30 Canadian Underwriter January 2010

their actions. Business owners are faced with greater corporate governance issues and are exposed to the increased vigilance of other partners, shareholders, employees and the public. Also, the number of claims aimed at establishing the personal liability of business owners or partners of a privately held company has increased. Several distinct examples exist of privately held companies facing litigation related to bankruptcy, misrepresentation, wrongful dismissal and dissolution of a partnership. In one case, a retail company expanded too much during a time of economic difficulty. Its revenues shrank, but inventory and supplies continued to grow. The result was bankruptcy. The company faced statutory liabilities and the directors were left exposed to pay for amounts owing (including unpaid wages). The settlement amount came to $765,000 (including $165,000 for defence costs). In Ontario, Bill 198 has made it easier for shareholders to sue companies along with their directors and officers. In the last 18 months, the number of lawsuits has increased significantly as a result of this legislation.

A FRESH APPROACH The unique risk profile of SMEs means management liability insurance solutions need to be tailored to fit the needs of these corporations. Creative, targeted products are required that simplify the process and yet still address the risk exposures of privately held companies in Canada. Underwriters and brokers have taken note. Given the corporate D&O market has gradually been reaching a saturation point in Canada, some insurers are now targeting the SME market. One packaged policy offers a low minimum premium, a streamlined application process, no requirement for audited financials and coverage for a wide range of industries. The policy auto-

matically includes D&O, EPL and Entity coverage, but it can also be extended to cover Errors & Omissions and Fiduciary Liability. For SMEs, the benefit is a simplified application that can be filled out in less than an hour, not days. Protection is available at realistic premiums. Coverage is offered on a claims-made basis. Brokers in Canada should be interested in the SME market because of the importance of small commercial clients to their practices. Although many of these clients likely have a CGL policy in place, a significant proportion do not have management liability protection. This is a great way for brokers of all levels to extend the product suite and fill any insurance gaps in a client’s portfolio. It also gives brokers an excellent opportunity to build closer relationships with business owners, CEOs and CFOs.

Given the corporate D&O market had gradually been reaching a saturation point in Canada,some insurers are now targeting the small and medium enterprises (SME) market. The unique risk profile of SME means management liability insurance solutions need to be tailored to fit the needs of SMEs. When it comes to management liability, it’s clear a potentially significant coverage gap exists for many privately held companies in Canada. Equally clear is that many of the management liability products are not well suited to the SME market. The main purpose of any new D&O or EPL insurance solution should be to help protect these organizations. It’s time for a fresh perspective on small and medium enterprises..

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Catastrophic Ambiguity Ontario’s formula in law for determining ‘catastrophic impairments’ is based on medical guides that are 20 years old, and has been interpreted in a variety of ways by judges and arbitrators. And yet the health of the province’s auto insurance system is riding on the clarity of its meaning. By Vanessa Mariga

32 Canadian Underwriter January 2010

+

One

plus one is two. If only quantifying wellbeing were so straightforward and simple. What are doctors supposed to add and subtract when examining a patient to determine if their injuries are catastrophic? It’s not a straightforward formula, and solving for ‘x’ and ‘y’ has never been more complicated. When the Ontario government handed down its list of reforms for the auto insurance product in November 2009, among them was a proposed review of the definition of catastrophic impairment. The current definition, initially drafted in 1996 under the Statutory Accident Benefits Schedule (SABS), has morphed and shifted through various arbitrator and judicial decisions. Perhaps the most important shift has been to combine Subsection 1.1 (f) of the SABS (“55 % or more impairment of the whole person”) with Subsection 1.1. (g) of the SABS (extreme impairment “due to mental or behavioural disorder”) to determine what’s known as “whole body impairment.” Experts say the combination of physical impairment with behavioural/psychological impairment has led the industry into murky waters when determining catastrophic impairment. Sources say a clear formula no longer exists, in part because the way to calculate psychological impairment lacks any scientific merit or methodology. In addition, the guidelines prescribed by the legislation are outdated. As the government sits down to draft its formula for determining catastrophic impairment, members of the health care and insurance industries were asked to comment on what they believe are the shortcomings of the current definition of catastrophic impairment and on how they would prefer to see it defined.

January 2010 Canadian Underwriter

33

COVER STORY

Catastrophic Ambiguity ‘Catastrophic’ defined Subsections 1.1 (e), (f) and (g) of the SABS are coming under particular scrutiny. Subsection 1.1 (e) relates to brain impairment, and essentially relies upon the Glasgow Coma Scale (GCS) in gauging the severity of the impairment. The GCS is an assessment of impaired consciousness and coma based on eye opening, verbal and motor responsiveness. It consists of 15 items in three basic categories: motor response (six items); verbal response (five items); and eye opening (four items). Points are awarded for the best response in each category and category scores are added up to provide a global GCS score. A further explanation can be found in Evidence Based Classification of Brain Impairment: Application to Catastrophic Impairment Classification. Summed scores range from a minimum of three (total unresponsiveness) to a maximum of 15 (alert, fully responsive). Under the SABS, if a person scores a nine or less “within a reasonable period of time after the accident,” or achieves a score of two (vegetative) or three (severe disability) on the Glasgow Outcome Scale more than six months after the accident, they meet the catastrophically impaired threshold. Subsection 1.1 (f) is traditionally thought to refer to physical impairments. According to this subsection, in order for an injury to be considered catastrophic, it must be: “an impairment or combination of impairments that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in 55% or more impairment of the whole person.” Subsection 1.1. (g) covers mental and/or behavioural disorders and stipulates that such impairments must “in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, [result] in a class four impairment (marked impairment) or class five impairment (extreme impairment).” Adding a ‘y’ into the equation The written definitions above may appear to be straightforward, but judicial decisions and arbitration decisions 34 Canadian Underwriter January 2010

by the province’s insurance regulator, the Financial Services Commission of Ontario (FSCO), have opened the door to a wide variety of interpretations. One of the most significant of these decisions is the 2004 Ontario Superior Court case Desbiens v. Mordini. This case was the first in which the courts looked at the combination of both psychological and physical impairment to calculate the whole person impairment.

? Perhaps the most important shift has been to combine Subsection 1.1 (f) of the SABS (“55 % or more impairment of the whole person”) with Subsection 1.1. (g) of the SABS (extreme impairment “due to mental or behavioural disorder”) to determine what’s known as “whole body impairment.” In Desbiens, the physical injuries of the plaintiff, Phillipe Desbiens, were not enough to place him at the 55% impaired threshold. But Ontario Superior Court Justice Harvey Spiegel (as he then was) determined that Subsection 1.1 (f) of the SABS referred to more than just physical injuries. Interpreting Subsection 1.1 (f) as a type of catch-all category, Spiegel also took into consideration the psychological effects of Desbien’s auto accident-related injury. As a result,

Desbien’s impairment total exceeded the 55% threshold and was thus defined as a “catastrophic” impairment. Insurance industry sources suggest the Desbiens decision, which effectively merged physical and psychological impairments, has led to a string of similar results in other arbitration and judicial decisions. This has created confusion and a lack of clarity, they argue. Tammie Norn, president of Proformance Adjusting Solutions Inc., says that Spiegel’s decision in Desbiens diverges from the original intent of the SABS. “To me [the decision to combine physical and psychological impairment] came as a real knock to the legislation because, when you read [Subsection 1.1 (f)], you understand that either you have a 55% or more physical impairment or you have a class four [psychological] impairment. It didn’t say that you can combine the two to meet the catastrophic threshold,” Norn says. “It was a bit of a shock to the industry when that came out, so it will be interesting to see how [the government] handles the definition, given the existing case law.” The looser interpretation also creates a bit of a loophole for claimants who may not necessarily be deemed catastrophically impaired, but who are borderline, to push past the 55% threshold, she adds. Lisa Fazzari, corporate claims technical advisor of accident benefits at The Economical Insurance Group, notes that a person with chronic pain disorder may now be entitled to catastrophic impairment benefits. “Yes, chronic pain is severe, did the government intend for people with chronic pain to have access to a $2-million limit?” Since Desbiens was handed down, reports suggest there has been an increase in the number of applicants making a claim under the “catastrophic impairment” guidelines. According to Insurance Bureau of Canada (IBC)’s submission to FSCO during the five-year auto review, insurers report being presented with increased numbers of requests for determination of catastrophic impairment. “The data on claim size from the SABS Statistical Plan appears to confirm these reports,

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COVER STORY

Catastrophic Ambiguity suggesting that between 2004 and 2007, the incidence of catastrophic claims may have risen by as much as 25%.” Fazzari says her company has seen a steady increase in applications for catastrophic impairment benefits under Section 1.1(f) since the decision, reaching a record high in 2009. Lowering thresholds, expanding loopholes The percentage of catastrophic claims does not represent a majority percentage of insurers’ overall accident benefit (AB) claims. In fact, Fazzari estimates these types of claims represent less than 10% of an insurers’ total claims volume. Still, the increased application for catastrophic impairment benefits creates the potential to increase costs for insurers and place an additional burden on the AB system as a whole. In discussing the province’s most recent package of 41 reforms, which are designed in part to help lower auto insurers’ claims costs, Leonard Sharman of the Co-Operators suggests that lowering the threshold for catastrophic injuries could potentially wipe out any benefits garnered from the rest of the auto reform package. “This is a very big issue for us,” he says. “We think this will determine how effective the reforms are, once they determine a definition for it. Lowering the limits will just result in more people trying to attain the catastrophic threshold.” Les Cabell, claims manager at Chartis Insurance (formerly AIG), says that while the increasing frequency of catastrophic claims creates concern, the severity of such claims poses a real challenge to insurers. “The problem with catastrophic impairments is not the benefits available [for them],” Cabell says. “Most of the time [the problem is] not the assessment decision itself, but it’s the process behind it.” Applications for catastrophic impairment benefits invariably wind up in the tort system, he says. “The overlap [between the AB and tort systems] is a problem because it muddies the waters in terms of intent,” he says. “The intent 36 Canadian Underwriter January 2010

of any of the [AB] medical assessments is to provide clarity and purpose, as well as treatment and benefits for an individual.” But when tort is a consideration, what typically happens is that [AB medical] assessments “are developed to support the tort claim, as opposed to being exclusively for the benefit of the applicant within the catastrophic and SABS system.”

? Fazzari agrees, adding that a typical assessment cost for a catastrophic claim under Subsection 1.1 (f) is between $15,000 and $20,000, because “now you need to have a number of disciplines assessing the claimant.” Dr. Sheldon Levy, medical director of Riverfront Medical Services, says that as you lower the threshold for benefit eligibility, you will include more ‘false positives.’ In other words, there is an increase in the number of requests made by way of OCF-18s and OCF-22s for goods and services, as well as assessments, that may ultimately prove to be unnecessary. “You set up a circle as you increase the number of false positives,” Dr. Levy says. “You increase the number of people applying for benefits that they may not medically need. These requests for funding must either be approved or assessed. It has the potential to create an additional cost to the system, and that cost has the potential to be significant.” In its submission to FSCO, IBC pointed to a 2005 study of 2,100 cases in the United States that were referred for an impairment rating review. Upon review, 80% of the original impairment ratings

were found to be erroneous; of these erroneous ratings, 89% were rated higher than what was appropriate. In order to stem the tide of applicants, Dr. Levy suggests that a possible gatekeeper role might be appropriate. “We need to have something come into place with respect to catastrophic claims,” he says. “We have a lot of people who don’t understand catastrophic impairment filling out OCF-19s [Application for Determination of Catastrophic Impairment].” This puts the insurer in a position in which it must respond. To better position themselves in responding to these OCF-19s, insurers might order further medical assessments to assist in making a determination. If the claimant is not deemed to have sustained a catastrophic impairment, more often than not the insurer’s position is rebutted. The individuals completing the initial application for determination are rarely responsible for crafting these rebuttals, Dr. Levy says. “So, you have inexperienced or untrained individuals who aren’t held to the same level of expertise as those who are charged with responding to the application,” Dr. Levy says. “And the initiators of the process are rarely, if ever, utilized in terms of rebutting their own application, so it goes to a third party.” And so, Dr. Levy maintains, “there has to be some threshold for access to the catastrophic impairment determination process. Whoever fills out the OCF-19 should have a certain level of expertise and knowledge. Because once you initiate the process, you can’t stop it. An insurer is compelled by legislation to respond.” FSCO eliminated designated assessment centres (DACs) from the SABS in March 2006. DACs were designed to avoid discrepancies between medical assessments initiated by claimants and their insurers. DACs were authorized to conduct independent assessments designed to balance the interests of both insurance companies and claimants. Insurers were required to initiate and pay for the cost of the DAC assessment, and claimants were required to cooperate in the assessment process.

COVER STORY

Catastrophic Ambiguity With the elimination of DACs, there is an absence of any standards or guidelines for catastrophic determinations, IBC said in its report to FSCO. If claimants dispute the determination of an insurer, they are entitled to be re-assessed by their own health care provider in order to address the issues raised by the insurer’s medical assessment. “It is noteworthy that between 1996 and 2004, during most of the period that FSCO’s catastrophic determination guidelines were in effect, no decision [to define an impairment as ‘catastrophic’] made by a DAC was disputed through arbitration or court process,” IBC contended in its report to FSCO. “The financial incentive of the rebuttal feature of the post-DAC regulations is encouraging more health professionals to enter the process of doing catastrophic evaluations.” Lost in translation One key element is missing from any proposed formula that would combine physical and psychological impairments. Medical experts say the guidelines mandated by the Ontario government are outdated. In fact, the entire validity of the GCS has been called into question as a medical test. The SABS requires that injuries be assessed according to the 4th edition of the American Medical Association’s Guides to the Evaluation of Permanent Impairment. The fourth edition is now nearly 20 years old. Norn says the use of outdated guides creates a disconnect. “There’s a reason why there have been two revisions since the 4th edition,” she says. “I would assume that if they’re going to look at the [catastrophic impairment] definition, they’re going to have to look at whether or not they are going to continue to use the AMA guidelines [to define it] and whether or not they are going to use the current one.” Dr. Zohar Waisman, a consultant psychiatrist with extensive experience in medical evaluations of personal injury litigants, notes that a 6th edition of the AMA guidelines was published in 2008. “The 6th edition contains clearer guidelines as to impairment ratings,” Dr. Waisman says. “It contains better tables and charts that would point us in the right direction in terms of percentage ratings.” 38 Canadian Underwriter January 2010

Until Desbiens, percentage ratings were never assigned to Subsection 1.1 (g) impairments, Dr. Waisman observes. Rather, medical practitioners would classify the person as moderately, mildly or severely impaired. “The difficulty we have in the (g) criteria is that it’s not clear how we derive that percentage,” Dr. Waisman says. “There’s no scientific method that would allow us to derive a percentage score. So that lends the guides to wide interpretation and creates disagreement. There’s no clear understanding or formula we can use to derive that percentage.” Chapter 4 of the AMA guidelines specifically talks about the mental issues that might emerge as the result of a brain injury. But there is no similar chart to help track emotional problems — such as depression, for example. “A lot of the people we see don’t have a brain injury at all, but they do have psycho-emotional problems,” Dr. Waisman says. “But we don’t have any guides to view that. The courts argued that you can draw conclusions from that chart, but there is no clear understanding how to transpose the information.” Medical experts are instructed to find “the most analogous” impairment if a particular impairment is not listed in the guides, Dr. Waisman explains. “If someone has a chronic pain disorder, that’s not the same as having behavioural problems from a brain injury,” he says. “How can you apply percentages from the brain-injured population to other populations that are not brain-injured? It’s open to interpretation. The difficulty is where the percentages were derived from, and what scientific method was used to derive them.” Dr Levy agrees. He says without a validated methodology to convert the mental/behavioural Subsection 1.1. (g) score from a classification to a percentage rating, it is impossible for those using the guides to do so on a consistent basis with any degree of scientific certainty.. Medical v. legal The AMA guidelines are not the only outdated piece of the SABS. In its report to FSCO, IBC says “catastrophic”

brain impairments are currently defined based on academic literature published between 1975 and 1981. “In addition, the definition of brain impairment and its relationship to the predictability of long-term outcomes have come under scrutiny from consumers, government, health care providers and private payment stakeholders.” Consequently, a panel of experts from the Canadian medical field met in 2008 to develop an evaluation framework based on the best evidence available. A report of their work was intended to help to predict future care needs after traumatic brain injuries for adults older than 21 years of age. The panel developed the following definition of a catastrophic brain impairment: “Catastrophic brain impairment is trauma to the brain that results in physical and/or cognitive difficulties severe enough that an individual cannot function in the community in normal expected adult roles and require professional, social and/or physical support to maintain them safely in the environment in which they live.” In its discussion, the panel examined the use of the GCS to determine brain impairment. The panel noted that while the GCS test is straightforward, easy to administer and sufficient for determining impairment within a short time frame after an injury, it is not very effective at determining long-term effects. Dr. Levy notes the 2009 Ontario Court of Appeal case Liu v. 1226071 Ontario Inc. (Canadian Zhorong Trading Ltd.) recently found the GCS is a legal test, not a medical test. “The idea of it being a medical test is that you apply a set of medical criteria to identify those people most in need of catastrophic benefits,” Dr. Levy says. “But, if you make it a legal test, you’re simply looking at an isolated number, post-accident, potentially out of context and out of sync with any real or true medical sequelae [complications caused by a condition].” In contrast to the medical community’s focus, which is ensuring appropriate treatment to those that require it, the court’s focus would appear to be on the abstract number nine — the GCS number below which a person meets the

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Catastrophic Ambiguity definition of a catastrophic impairment. When you start to focus soley on the number, Dr. Levy says, “you’re losing the medical component of the assessment. You’re basically saying: ‘The GCS was less than nine, they had a brain impairment, and therefore they are catastrophic and are entitled to apply for access to extended benefits.’ Whereas with the medical test, you can say: ‘The score was less than nine, however it improved to greater than nine within a reasonable amount of time, therefore perhaps they don’t meet the definition of catastrophic impairment and do not medically require access to extended benefits.’” Solving for clarity The lack of clarity surrounding the current definition and its methodology means adjusters, insurers and medical practitioners must basically rely on their best judgement to determine whether or not someone is catastrophically impaired. “It’s a very long and expensive process, it would be nice to have some clarity,” says Laurie Walker, an adjuster at SCM ClaimsPro. In the meantime, Walker says, adjusters are relying heavily — perhaps too heavily — on assessments. “The brain injuries are probably the most complex,” she says. “Every person’s brain and how they receive an injury and how they will respond to rehab is different. Instead of adjusters trying to understand (or if they don’t have the time to understand), they’ll just have it assessed, which is expensive and creates a delay in treatment.” Norn agrees, referencing the government’s recent recommendation to have specialized training for adjusters for complex injuries. She says to provide training that would help an adjuster view the impairment as a combination of the physical and psychological, it would require “getting the right health care professionals to provide the training on what this looks like.” She notes adjusters these days might not be dealing with a 55% injury threshold or a Class 4 injury, “but look at all of these impairments and put them together and quite possibly you are dealing with 40 Canadian Underwriter January 2010

a catastrophic case here,” she says. Ideally, training workshops would contain examples of these types of cases. “Then the next time the adjuster has one of these cases, he or she can think: ‘This is similar to what we dealt with in our workshop,’” Norn says. In turn, this would help adjusters figure out what type of medical health care providers they must use to help them understand

?

the type of injury in question. Other industry stakeholders hope to see a new, concrete definition that eliminates any cause for confusion. “We need a definitive, clear, objective definition,” says Ralph Palumbo, IBC’s vice president for Ontario. “One of the things IBC is suggesting is that paragraphs (f) and (g) be removed [from the SABS].” Until a concrete definition is drafted, IBC would like to see — using a clear, unambiguous language — a list of injuries and impairments considered to be ‘catastrophic’ for the purpose of the SABS. “If you’re going to go down the road and try to redefine catastrophic impairment, that’s going to take a long time,” Palumbo says. “So, in the short term, while you’re preparing the regulations, at least bring some clarity to the auto reform initiative by saying: ‘These are the injuries and the impairments.’ That way everyone understands exactly where we are and is reading from the same page.” Fazzari agrees. “If you don’t meet any of the impairments listed, then you’re not catastrophic,” she says. “We can underwrite for that.” Scott Blodgett, media relations officer at the Ministry of Finance, says the government’s timelines for discussing

the ‘catastrophic impairment’ definition have not yet been finalized. Nor is it known which stakeholders will be participating in the discussion. As for what is on the table, Blodgett said the government intends to study what other jurisdictions are doing. Manitoba, for example, recently passed Bill 36, which includes a broad definition of catastrophic injury. The definition includes, among other factors: “the functional alteration of the brain resulting in determined impairment of 50% or more,” or a combination of a list of injuries. The list includes “functional alteration of the brain resulting in a determined impairment of 30% or more but less than 50%,” resulting in a whole body impairment of 80% or more. Quebec, on the other hand, has a method that isn’t likely to be adopted by the Ontario government anytime soon. Blodgett notes that Quebec’s use of a ‘meat chart’ — which graphically itemizes injuries and their projected treatment costs — compensates accident victims in the absence of tort recovery, but is not a direction that Ontario is likely to follow. Should the province opt to continue with the practice of merging physical and psychological impairments for the purpose of determining “whole body injury,” Sharman says The Co-Operators would like to see the threshold go to 65%, rather than the current 55%. This would help correct for the anticipated “false positives” in determining whether claimants meet the catastrophic threshold. Whatever the outcome of the changes may be, sources agree there should be some formal communication once the new guidelines are drafted. In this way, everyone — including insurers, adjusters, health care providers and consumers — will have a common understanding about what constitutes a “catastrophic” auto injury. “Everyone needs to be on the same page, and adjusters need to be properly trained in handling and identifying these types of conditions,” Norn says. “You need to know early on if you’re dealing with a catastrophic claim. And you’re not going to know that unless you understand the definition.”

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Opinion/Analysis

Sight Unseen Do brokers know how creditbased insurance scoring is affecting their clients? A regulatory survey suggests their clients don’t know either.

Randy Carroll

CEO, Insurance Brokers Association of Ontario (IBAO)

The Canadian Council of Insurance Regulators (CCIR) released the results of their survey on the use of credit-based insurance scoring (CBIS) in November 2009. Among its findings, the survey confirmed the use of CBIS is not only widespread, but the majority of carriers using this information are not disclosing its impact to the policyholders. These and other findings within this study outline many of the latent risks that are associated with the practice of credit scoring in property and casualty insurance. In their findings, the CCIR survey reported that of the carriers that responded, 19 (representing 55% of the property insurance markets in Ontario) currently use credit scoring in the qualification, rating or underwriting practices for personal property insurance.The survey also confirmed that the list of carriers using CBIS’s is growing: six companies representing a further 6% of the market advised they intended to begin using CBIS sometime during the next three years. The Insurance Brokers Association of Ontario (IBAO) continues to receive an increasing number of calls from brokers advising of new carriers adopting a credit-based approach to underwriting, creating endless efficiency challenges

42 Canadian Underwriter January 2010

in serving their existing clients. We have also heard from confused consumers who are receiving renewal increases in excess of 100% with no corresponding change in risk. When one reviews the results of this survey, it is apparent that if you asked consumers on the street, most would have no way of knowing what impact this practice has on their premium. The survey results show that despite the fact that 79% of respondents currently disclose information about discounts and surcharges on their policies, only one actually displays resultant surcharges or discounts arising out of a consumer’s CBIS. IBAO’s position on the use of credit scoring in personal lines insurance is well documented, and I do not intend to regurgitate all of the points from a social or operational standpoint. I would, however, like to offer from a practical standpoint how you as an independent broker professional, to whom consumers look for trusted advice, would advise your clients based on the CCIR’s survey results. How would you explain to your client why their credit information has been used, yet no one felt it necessary to advise the client of the impact the credit score had on his or her premium? From the standpoint of some insurers, the answer seems to be easy: don’t tell them. From the standpoint of other insurers, the answer seems to be to download the obligation onto the broker community. In an industry that has suffered a longstanding image problem steeped in consumer mistrust, these kinds of scenarios continually reinforce a negative perception among a constituency that already finds trusting us difficult. For years, we

have tried to outline the benefits of dealing with a broker and outline the differences between brokers and insurers. At all times our key message has emphasized the importance of our independence and how this independence allows us to be their advocate and work on their behalf. I would argue that if we play an active part in the credit game, it would severely compromise our position as the independent advocate for the consumer. Although the CCIR’s report is not as extensive as studies that we have seen out of the United States, we are very encouraged that the Financial Services Commission of Ontario (FSCO) and the CCIR conducted this study: it is the only Canadian study on the subject of which we are aware. We believe the government is now armed with appropriate data to make a decision about how to protect consumers from an obvious risk arising out of a lack of awareness, but also act responsibly to build confidence in the industry and its regulatory bodies.

We believe the government is now armed with appropriate data to make a decision about how to protect consumers from an obvious risk arising out of a lack of awareness about credit use. We continue to try to wrap our head around ways in which we could best address this problem. We have been engaged in conversations with insurers, both for and against the use of credit.We have also been engaged in discussions with government across all party lines. In all instances, we have heard a full range of suggestions — including widening the use of credit, defining a fair use and an outright ban. As an association representing individuals in an industry that is already heavily regulated, it is never our goal to ask for more regulation. However, given

what we have witnessed over the past nine months, in addition to the results revealed in the CCIR’s survey, it is clear that insurers are not handling this information in a manner that displays responsibility, fairness or accountability. What we have seen, and what the CCIR report reveals, will in no way promote consumer confidence, nor will it give consumers a sense that they or their information are adequately protected. Given the frequency with which brokers are advising IBAO that this process is displacing their customers, and also taking into consideration how aggressive some insurers have been about the use of credit scoring, we are left with no choice but to continue to push for a ban on the use of credit scoring. Affordability and availability of insurance should not be a social issue. Consumers deserve better. And we as a group of independent broker professionals should show by way of example how the consumers’ interests are truly our top priority.

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Continuous Improve

ment

Norm Angrove

Senior Manager, Value Added Programs, PPG Industries

Given today’s economic reality, the key to a collision centre’s future success lies in the ability to improve throughput and gain the competitive advantage of quality, speed and cost. It requires a well-planned re-engineering of the traditional repair process, from estimating, sales and repair planning through to production and delivery. These new requirements can be seen as a benefit for not only the individual collision repair centre, but for the insurance industry as well. As these changes take hold, the improvements translate into quicker cycle-times and reduced wait times. Both the claims manager and the insured will notice positive changes in their dealings with today’s progressive collision repair centres.

46 Canadian Underwriter January 2010

CONTINUOUS IMPROVEMENT Gone are the days of a successful collision repair centre having a disorganized paint room or dirty waiting area with old magazines. Successful collision repair centres are operated by sophisticated business people who are looking for methods to improve their business and increase their sales. Their difficulty lies in gaining access to proven programs that will help them achieve these objectives. Fortunately, many suppliers and manufacturers recognize that many of their customers do not have the resources to obtain training. Consequently suppliers and manufacturers are providing collision repair centres with much-needed, established training programs. One example is PPG’s Green Belt Training. This comprehensive, multi-day training program is based on the practical application of Lean Six Sigma, tailored for collision repair. The curriculum has been carefully developed to provide an effective balance between teaching the proven science behind process improvement and implementing practical solutions for driving

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best-in-class performance at the collision repair centre. Learning takes place in the classroom and on the shop floor, and is intended to give collision repair centres a competitive advantage based on the principles of quality, speed and cost. “It’s not surprising that demand for Green Belt Training has grown significantly,” said Jim Berkey, director of MVP business solutions for PPG Industries. “To date, more than 750 owners and managers have completed Green Belt Training. With all the challenges our industry is facing — be they economic, environmental or technological challenges — as well as intense competition, shop owners

Initially there was a bit of resistance to all of this change. But the results proved to the team that it was worth it. We reduced our cycle time by 25% within six months of attending PPG’s Green Belt Training program. want practical tools and support that can genuinely help them improve quality, speed and cost.” Collision repair centres are eager for this type of training. They know that once they get over the hurdle of implementation, the benefits to their business will be amazing. “Initially there was a bit of resistance to all this change,” explains Don Strong, owner of CARSTAR Ottawa, a recent PPG Green Belt graduate. “But the results proved to my team that is was worth it.We reduced our cycle time by 25% within six months of attending PPG’s Green Belt Training program, a huge win. Other benefits we’re proud of include the cleanliness and organization of the shop as a result of the Green Belt 5S portion of the training. Now, 18 months later, we’ve achieved a huge buy-in from the staff and the program is beginning to be driven from the shop floor and has really become a continuous improvement cycle.” Collision

48 Canadian Underwriter January 2010

repair centre owners and managers such as Don, people with insight, forethought and who continue to strive for continuous improvement, will undoubtedly succeed.Their success and their outlook will keep them ahead of the curve.

CONTINUOUS IMPROVEMENT: HELPING INSURERS Continuous improvement benefits everyone. The insurance industry is already constantly monitoring and benchmarking collision centre performance. So it clearly stands to benefit from knowing which collision repair centres are committed to ongoing training and thereby ensuring operational excellence. “Canadian collision repair is following a global trend to improve processes in order to provide the most valuable, winwin scenario for all stakeholders,” says Nancy Ng, insurance services manager of PPG Canada. “When processes improve, each interested party benefits and can move to the next phase of improvements following the continuous improvement philosophy. Collision repair facilities interested in competing in the future and gaining access to insurance work will need to be best in class in order to capture that market.”Top collision repair centres will require this forwardthinking perspective to succeed in an environment in which insurance continues to be an important force. Insurance claimants are also important people in this story. Insurance brokers are always looking to keep their customers happy. If brokers know they can recommend a progressive collision repair centre that is continuously improv-

ing itself, they will feel some measure of comfort in knowing that their customers will be satisfied with the repair process. Claimants may not fully appreciate what’s behind the use of the terms “improved cycle-time” and “decreased keys-to-keys days,” but they will appreciate the outcomes. This makes for happier claimants and, for the insurance company, reduced associated costs. Marty Reddick, owner of four Supreme Collision locations in the Toronto area says his insurance partners have commented on their highly satisfied claimants. Not coincidentally, they also noted an improvement in KPIs at the four locations as a result of completing the Green Belt training. “The reason is simple,” explains Reddick. “We are now continually measuring ourselves. ‘How good can we be? How can we improve moving forward?’ These questions encourage us to set and achieve greater accomplishments.” Today’s progressive collision repair centres are taking the necessary steps

The insurance industry is already constantly monitoring and benchmarking collision centre performance. So it clearly stands to benefit from knowing which collision repair centres are committed to ongoing training and thereby ensuring operational excellence. needed to ensure they are meeting and exceeding today’s performance realities and positioned to capitalize on tomorrow’s opportunities. The goals and objectives of PPG’s training programs include providing valued customers with the tools, systems and processes to ensure they have the ability to accelerate their performance, enhance their leadership skills to implement change and maximize their overall business performance.

2010 Change For Change Campaign WICC Ontario Chapter is challenging you in its battle to help conquer cancer. To help us reach our 2010 Change For Change (C4C) Ontario industry goal of $20,000 – we’re inviting you to join in some friendly competition with your insurance industry colleagues. T he WICC C4C Insurance Industry Challenge is a fun, motivational fundraising event to raise as much funds as possible with C4C donation boxes. • It is not just about the donation box – have some fun with your employees such as simply donating change to ‘change’ their work attire for a day from business to casual wear. • Great prizes are available throughout the year for the top fundraisers! • The top three companies with the most funds raised by the end of April, July and October in 2010, will have their companies featured in a one-page advertisement in Canadian Underwriter. • The company which raises the most funds by the end of December 2010 will receive our grand prize of a full one-page advertisement profiling your company in the February 2011 issue of Canadian Underwriter and recognition at our 2011 Gala Dinner! We will give you everything you need for a successful challenge.

Don’t miss out on this great opportunity to do the right thing to help Make Cancer History.

Visit our website for details on sign up and full contest rules or contact Adrian Hall at wicc-changeforchange@hotmail.com

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Wa t e r f r o n t Risk Waterfront cottage owners are now legally obligated to consider whether or not their actions might have increased the likelihood of serious injuries on their property. Nadia MacPhee Associate, Barry Spalding

Barry Spalding is a member law firm of The ARC Group Canada.

When assessing liability risks for waterfront properties, underwriters must consider two important questions. First, has the insured taken any actions that would heighten the prospect of serious injuries occurring on the insured’s property? If so, what can be done to minimize such risks? These issues came up in the 2009 New Brunswick Court of Appeal decision in Brown et al. v. Keenan et al. The insureds, Rex and Carolyn Brown, had constructed a dock with attributes leading one to believe that the depth of the water was much greater than it actually was. They had added to this perception by mooring their large motorboat between the arms of the dock. Simple and inexpensive steps could have been taken to negate this heightened risk. The Keenan v. Brown decision demonstrates that cottage owners and their insurers should ask these questions and not simply rely on local custom.This article will focus on the standard of care applicable to waterfront property owners NBCA 81.

50 Canadian Underwriter January 2010

BACKGROUND Litigation in Brown arose as a result of a diving accident that occurred in the early morning hours of Aug. 6, 2001. The plaintiff, Courtney Keenan, after spending an evening at a party with a group of friends, went back to the Browns’ lakefront cottage property at the invitation of one of the defendants’ adult children. Keenan was in his early 20s and had been consuming alcohol that night. Two women from the group went into the water to cool off. They were crouched down in the water next to the defendants’ dock. Because they were crouched down, the water level was up to their necks. The defendants’ dock was 32 feet long leading from the cottage/shore line. The Browns had moored an 18-foot motorboat between the two arms of the dock. Also, two ladders led into the water from the dock. Keenan ran down the length of the dock and dove head first into the water. He suffered injuries that left him a tetraplegic. The plaintiff brought an action in negligence against the defendant property owners.

SUMMARY OF DECISIONS Evidence at trial revealed the water level at the end of the dock was between two and two-andone-half feet. The trial judge found the “visual

cues” present on the night in question — including the women crouched in the water, the presence of the large boat, the presence of the ladder and the length of the dock — led the plaintiff to believe that the water at the end of the dock was much deeper than it in fact was. There was no warning that the depth of the water was insufficient for diving. The trial court determined that Keenan and the Browns were both liable for Keenan’s injuries and apportioned liability equally between them. The Browns appealed and alleged a number of errors on the part of the trial judge. They submitted that there was no duty of care, the trial judge incorrectly selected and applied the standard of care, erred in finding causation between the Browns’ actions and the plaintiff’s injuries and finally challenged the court’s apportionment of liability. The Court of Appeal dismissed the appeal.

STANDARD OF CARE FOR WATERFRONT PROPERTY OWNERS The trial court and the Court of Appeal in Keenan applied the common law standard of care for negligence in assessing liability against the Browns.The Supreme Court of Canada established the test in Ryan v.Victoria (City) et al. in 1999.The test requires that a person exercise the standard of care that would be expected of an ordinary, reasonable and prudent person in the same circumstances.This test supplanted the common law of occupiers’ liability, which had previously been the law in New Brunswick.1 Both the trial court and the Court of Appeal found the Browns had not met the standard of care expected of them. In coming to this conclusion, the trial judge stated as follows: “It is foreseeable that the shallowness of the lake could lead to injuries,” the trial judge wrote. “ The evidence reveals that the Browns realized that the shallow water presented a hazard. Mr. Brown said they built the float so that people could swim ‘in a safe atmosphere.’ Mrs. Brown said they advised strangers

52 Canadian Underwriter January 2010

that the water was shallow. Jennifer Keilty said she warned her children not to jump in the water because ‘it’s not safe.’ Therefore I find that not only was the hazard foreseeable, it was actually foreseen. “Dr. Wilson listed a number of ‘cues’ which led Keenan to conclude that the water was deep…[T]here was the 32-foot dock leading from the bottom of the stairs straight out into the lake.

Suffice it to say that cottage dwellers will now have to reevaluate the precautions to be taken to avoid a foreseeable risk of harm of the kind that has materialized in Brown et al. v. Keenan et al. For some, including Keenan, this was both an invitation and a means to dive into the lake. It not only facilitated his dive, it allowed him to run a considerable distance before executing it. “In addition, there were two ladders attached to the dock and an 18-foot boat was located between the two arms of the H.These reinforced Keenan’s perception that the water was deep enough for him to dive safely. “These structures were all created by the Browns. If they had not been there, Mr. Keenan would have had to wade into the lake. The intrinsic hazard created by the shallow water was increased by the presence of the dock.” The court went on to find that having built the dock, the Browns could have taken steps to prevent guests from diving — including installing a barrier at the end of the dock and posting signage warning of the shallow water. The trial decision is significant because it cautions property owners to consider the perceptions of those who are invited onto their properties. Although the Browns did not set out to misrepresent the depth of the water, their actions had

this unintended consequence. On appeal, the Browns argued that they had met the standard of care. They submitted that a reasonable cottage owner should not be expected to post signage warning of shallow water or erect a barrier at the end of the dock because the threat of shallow water was obvious. They further argued that other property owners in the province did not take the steps the trial court required. The Court of Appeal recited the trial judge’s findings about the perception created by the presence of the dock and the motorboat and addressed the Browns’ arguments as follows: “The second prong of the Browns’ second ground of appeal hinges on the validity of the argument that the trial judge erred in fixing the standard of care by reference to the erection of a warning sign or barrier at the end of the dock (to take reasonable measures to ensure that persons, such as guests, were aware of the inherent risk of harm should they decide to dive from the dock),” the Appeal Court wrote. “The Browns argued that there was no evidence that this standard is followed anywhere in the province. In effect, the Browns are arguing that they had acted no differently than any other cottage owner. In our view, this is not the case where the court should be drawn into a legal analysis of the role of ‘custom’ as a means of exonerating a defendant from civil liability. Suffice it to say that cottage dwellers along the shores of Skiff Lake will now have to re-evaluate the precautions to be taken to avoid a foreseeable risk of harm of the kind that materialized in the present case…(Emphasis added.)” The Court of Appeal has provided clear guidance that should be observed both by property owners and their insurers. In order to meet the standard of care, property owners have to consider what risks are foreseeable and what can be done to address those risks. 1 See the Court’s discussion of the history of occupiers’ liability law in New Brunswick in Reid v. Hatty (2005), 279 N.B.R. (2d) 202 (C.A.))].

Dream in colour WICC Ontario – 14th Annual Gala Dinner

Wednesday, April 14th, 2010 in Metropolitan Grand Ballrooms at the Westin Harbour Castle 5:00 p.m. – Cocktails and Silent Auction 7:00 p.m. – Dinner and Entertainment Tickets: $190 each $1,900 for a table of 10. This unique event will no doubt sell out early so register today at www.wicc.ca Payment terms: cheque, VISA, MasterCard, American Express E-tickets will be sent to the registrant approximately 2-3 weeks prior to the event.

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Metam o Metamorphosis s r i p s o h h p r o o o s Mettaam r i h s o p m r e o M tam Me The Canadian Independent Adjusters’ Association (CIAA) has been working hard over the past year to re-invent itself through an inclusive and exhaustive strategic Patti Kernaghan planning process. President, Canadian Independent Adjusters' Association (CIAA)

Change at the Canadian Independent Adjusters’ Association (CIAA) doesn’t mean throwing out the association’s time-honoured traditions and methods. It means applying creative energy to our practices, taking a new look at our membership benefits, breathing new life into the organization and communicating with the entire property and casualty industry, not just our members. It means communicating about who we are, how we make a difference in the claims industry and how people can learn more about the CIAA and the opportunities these changes offer. It means raising the bar on ethics and standards, so the entire industry recognizes that the CIAA is the voice of the professional membership for independent adjusters in Canada and represents the value we bring to the industry. Change has been in the air since our executive meeting in February 2009, when then-CIAA president Reno Daigle asked me to undertake a

54 Canadian Underwriter January 2010

“self-analysis exercise” for the CIAA. At that time, I was the CIAA’s second vice president and executive committee advisory chair. The request seemed like a very daunting task.Where to begin? I took the opportunity seriously and started my research with two Vancouver professionals: the vice president of Concerto Research, a market research firm, and the CEO for ViRTUS, an experience-based leadership and organizational consulting firm.Their advice was loud and clear: survey your stakeholders and hold a creative strategic planning session to review the survey findings and take actionable strategic steps towards change.

STEPS TOWARDS CHANGE The first step was to conduct an inclusive industry survey to gather feedback and help us gain an understanding of our focus. Our executive director, Pat Battle, gathered preliminary questions and feedback from the executive. I worked with two research firms to determine costs and direction.We chose the survey firm and started moving the process along faster. Once on the road to “change,” we began to realize everything costs money. Also, we recognized the importance of communication: if we did the “selfanalysis,” but we didn’t tell anybody, who would really know? What difference would it all make? Clearly the next step was to solicit other peo-

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ple’s help. But how were we supposed to gather members for a committee from across Canada and sell them on the idea we needed to re-invent ourselves? Would they believe us if we told them they didn’t need to do any “real” work, just show up and do a little planning? Sure they might have to fly all the way to Toronto, but who wouldn’t want to come all the way from Yellowknife to “sunny”Toronto? My conversations with Mary Charman, soon to be my first vice president, Greg Merrithew, soon to be my second vice president, and ultimately the rest of the creative strategic planning (CSP) committee helped me develop a vision of the action we needed to take and how to get there. People like Carol Messervey, Miles Barber, Lesia Yacht, Craig Walker, Pat Battle, Jim Eso, Reno Daigle, Jean-Marc Laurin, John Seyler,Ted Baker and Allan Hart knew that it was a huge commitment to give three days to the association “sometime” in the fall. My full-time job was starting to get in the way of my real job — the “self-analysis” of the CIAA.

REACHING OUT The nagging questions ––“What difference will this work make?” and “Who will care in the end if only a select group know about the changes?” –– still bumped in the back of my brain. It became clear that to change our association, and to have an impact on the profession of independent adjusting, we needed to reach out to all our stakeholders, both internal and external. We worked hard with Concerto Research to plan the survey to engage stakeholders: members, non-members and industry stakeholders. Next, we needed to connect face-to-face and present our survey results to key stakeholders: both our members and the people who use our services daily. I had many conversations, but the ones with Peter Hohman, CEO of the Insurance Institute of Canada (IIC), provided me the tipping point in terms of direction. The project grew like a monolithic frog sitting on the edge of my desk waiting to be fed.What was the next step? If we wanted to communicate with the in-

56 Canadian Underwriter January 2010

dustry at large, we needed stakeholder sponsors to help us deliver our message to the industry. We needed key industry stakeholders to give us face-to-face advice on how we could change. These two pieces were key! Ultimately we received an excellent response to our survey requests, our sponsorship needs and also our stakeholder focus group. Stakeholders like Don Forgeron, president of the Insurance Bureau of Canada (IBC), showed he

The first step was to conduct an inclusive industry survey to gather feedback and help us to gain an understanding of our focus. Once on the road to “change,” we recognized the importance of communication: if we did the self-analysis, but we didn’t tell anybody, who would really know? understood the vision when he emailed saying: “This sounds like an impressive undertaking and I congratulate CIAA for its proactive outreach to stakeholders and for its capacity to embrace change…[Change is] a theme that is very important to me in my new role at the helm of IBC and one we will be focused on in the years ahead.”The advice we received from stakeholder participants during our “focus group,” in which the survey results were delivered to the CSP committee and the industry stakeholder group, was immeasurable. It provided a great starting point for the next day two days of creative strategic planning. We also realized significant gains by hiring a professional facilitator, Rick Evans, who brought all the loose ends together.

STAKEHOLDER GROUP Our very impressive stakeholder group included Ted Hellyer, vice president of programs at the Insurance Institute of

Canada; James Geuzebroek, manager of communication at IBC; Justin MacGregor, president of the Insurance Brokers Association of Canada of IBAC and executive vice president at Martin Merry & Reid; John Welton, secretary of the Ontario chapter of the Canadian Insurance Claims Managers Association (CICMA) and associate senior consultant at Transformation Dynamics; Michelle Reid, vice president of the Ontario Risk and Insurance management Society (ORIMS) and risk manager at Technical Standards & Safety Authority (TSSA); Carmen Place, past president of Canadian Defence Lawyers (CDL) and a partner of Lindsay Kenney; Bob Grouchy, assistant vice president of claims at Allianz Global Risks; Carol Jardine, president of the CUMIS General Insurance Company; Keith Shakespeare, chief operating officer at the Canadian Universities Reciprocal Insurance Exchange (CURIE); Heidi Sevcik, vice president of claims at Gore Mutual; Mark Weir, manager of special projects and claims at Intact Insurance; and Joel Baker, chair of the National Insurance Conference of Canada (NICC) and the principle of the Baron Quarterly Outlook. Our CSP committee included Mary Charman, Greg Merrithew, Pat Battle, Ted Baker, Miles Barber, Reno Daigle, Jim Eso, Allan Hart, Jean-Marc Laurin, Carol Messervey, John Seyler, Craig Walker, Lesia Yacht and me –– Patti Kernaghan. The independent adjusting profession has a collective impact on consumers. We are a large group communicating with consumers on our stakeholder’s behalf. As a professional association, we want to ensure our members are served by the best direction and priorities. We will soon be providing the results of our survey and the new CIAA strategic plans; this will be part of our ongoing efforts to work collaboratively within the industry for change in the claims field through new directions and priorities in the coming years. We have much to share over the next few months to enhance our value to the membership and industry at large.

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Courts across the country are defining how insurers may use plaintiffs’ Facebook pages to investigate potentially fraudulent claims. John Young

Director, Computer Forensics Giffin Koerth.

Jennifer M. Malchuk

Partner, Hughes Amys LLP

Facebook is becoming a commonly accepted tool of communication in today’s electronic world and can be considered a source of critical evidence in a motion. It is essential that this information is properly identified early in the process and preserved to ensure its integrity. Facebook allows users to post profile information, photographs and videos for viewing by a select (or not-so-select) audience, post updates of activity and allow for conversations between users. Clearly, this might be relevant and useful information about a person who is making an insurance claim based on some form of limitation or incapacity in the wake of an injury. The issue is how to access and use the informa-

58 Canadian Underwriter January 2010

tion. Facebook has privacy settings. A person can limit the availability of information to select users designated as “friends” (a private profile). Private profiles will not be accessible by defendant insurers. Rule 30 of the Rules of Civil Procedure governs the disclosure of documents within an action in Ontario.There is an obligation to disclose “every document relating to any matter in issue in an action that is or has been in the possession, control or power of a party,” and to produce each document unless privilege is claimed. Parties are obliged to produce sworn affidavits of documents and supplementary affidavits of documents to address subsequently-obtained, nonprivileged documentation or inaccuracies. If the court is satisfied that a relevant document might have been omitted, or that a claim of privilege has been improperly made, it could order: • cross-examination on the affidavit of documents; • service of a further and better affidavit of documents; or • disclosure or inspection of the document.

Illustration by Matthew Daley/www.threeinabox.com

Facing the Facts on Facebook

CASE LAW Kourtesis v. Joris The Ontario Superior Court of Justice first reviewed the issue of the admissibility of Facebook information in Kourtesis v. Joris.1 Damages were claimed for a loss of enjoyment of life, among other things. The court heard evidence that the plaintiff’s social and recreational activities were limited. After evidence in chief, the defendant determined that the plaintiff maintained a Facebook page. The page was restricted to her ‘friends.’ However, counsel was able to access the plaintiff’s cousin’s page, where the plaintiff posted post-accident photographs that depicted her dancing and performing other recreational activities.The de-

Since the plaintiff had put her enjoyment of life at issue, and given that she had previously produced pre-accident photographs, the Facebook photos were admitted. fendant sought to introduce the photographs into evidence. Since the plaintiff had put her enjoyment of life in issue, and given that she had previously produced pre-accident photographs, the Facebook photos were admitted, with leave to recall the plaintiff. The jury awarded the plaintiff Cdn$45,000 for general damages. Still, the defendant’s threshold motion was granted, with comment that the photographs supported the conclusion that the plaintiff continued to have an active social life and continued to enjoy life.2

Murphy v. Perger The Ontario Superior Court went on to consider the issue of the production of information from a private Facebook page in Murphy v. Perger.3 Again, damages were claimed for a loss of enjoyment of life. Defence counsel became aware that the plaintiff maintained a private Facebook page.The plaintiff deemed 366 users to be her ‘friends.’ Counsel also

located a publicly accessible page, maintained by the plaintiff’s sister, that contained photographs of the plaintiff engaged in social activities and text posted therein made reference to the plaintiff’s activities and referred to her as the “life of the party.” The defendant brought an ex parte motion for the preservation of the site.The motion also sought production of the information on the page. The preservaQuelmec-SV649-CU

7/14/06

tion order was granted. Ultimately, the photographs and information posted on the plaintiff’s Facebook page were confirmed to be ‘documents’ as governed by Rule 30. The defendant was not able to provide details of what was posted, since the contents of the page were private. Plaintiff’s counsel argued that without knowing what was on the page, the defendant was merely embarking on a fishing expedition; the plaintiff had an

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Canadian Independent Adjusters' Association (CIAA) "The voice of Independent Adjusters in Canada" www.ciaa-adjusters.ca Honourable Order of the Blue Goose—Ontario Pond Our fraternal organization has been dedicated to fellowship and charity since 1908. www.bluegooseontario.org The Insurance Institute of Canada The professional educational arm of the industry. www.insuranceinstitute.ca Risk & Insurance Management Society Inc. Dedicated to advancing the practice of effective risk management. www.rims.org

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expectation of privacy related to what was posted on her page. The judge agreed with the defendant that it was likely the site contained relevant information. She dismissed the plaintiff’s privacy argument on the basis that the plaintiff had granted 366 ‘friends’ access to the site. Production of the information was ordered. A similar order was granted in Wice v.The Dominion,4 an action for accident benefits, in which the plaintiff's functional abilities were an issue.

Leduc v. Roman In Leduc v.Roman,5 the court delved further into the issues of the access to and the production of material contained in ‘private’ Facebook pages. Again, a plaintiff claimed a loss of enjoyment of life. The plaintiff was not asked about Facebook at discovery. A medical report, received after discoveries, made note of the plaintiff’s use of Facebook and that he had a lot of friends on the site. The page was private. The defendant brought a motion for a broad spectrum of relief, including interim preservation of the information on the site, production of the information on the site and a supplementary affidavit of documents. On the initial return of the motion, the case management master ruled that the Facebook pages were “documents” and that they were within the power and control of the plaintiff. The master also conceded that the pages might be relevant, since they related to the plaintiff’s post-accident activities. Nevertheless, he declined to order production of the information. He held that the defendant bore the onus to show that there were relevant documents on the website, not just that there might be. The master characterized the defendant’s request as a “fishing expedition” and ordered that the plaintiff serve a supplementary affidavit of documents. On appeal, Justice D.M. Brown agreed with the comments in Murphy,6 concluding the court can infer that Facebook users will take advantage of the different applications, including photographic applications, and that users share informa-

tion about themselves. However, he also indicated in his ruling that mere proof of the existence of a Facebook page does not entitle a party to gain access to all information contained on the page. He noted some material may relate to matters in issue, and some may not. He con-

Mere proof of the existence of a Facebook page does not entitle a party to gain access to all information contained on the page. firmed that some evidence of relevance must be adduced. Leave was granted to cross-examine the plaintiff on his supplementary affidavit of documents as to the content of his Facebook page.

USING FACEBOOK The potential effect of candid information posted by a plaintiff in weakening evidence pertaining to a lessened enjoyment of life following an accident can be seen in the Ontario cases discussed herein. The phenomenon of using Facebook for evidence is emerging in case law from across the country.8 But it is difficult to know with any certainty what information will be present, and whether to proceed with motions for production. The recent case of Schuster v. Royal & SunAlliance9 highlights the difficulty. In Schuster, the court refused to draw an

inference that the site contained relevant information merely because of the nature of Facebook. However, the plaintiff was obliged to serve a supplemental affidavit of documents and leave was granted to cross-examine. Insurers will want to be selective, choosing cases in which the plaintiff appears especially active, with many “friends,” and there is some indication of what material may be present from either discovery evidence or the sites of family and friends. It is fundamental to perform searches of plaintiffs in an effort to determine their status on social networking sites. Early searches and preservation should be performed on every file and updated on a periodic basis. Searches should also be performed in respect of a plaintiff’s family members and friends, since information about a plaintiff might also be present therein. Information secured should be preserved in a forensic manner where possible. Keep in mind that searches must be performed without making direct contact with a plaintiff. There are ethical concerns in making direct contact with a plaintiff who is represented by counsel. One should not ask to be made a ‘friend’ on a plaintiff’s page, write on a plaintiff’s wall (if the profile is open), or ‘poke’ a plaintiff, as this will communicate to the plaintiff that you are wishing to make contact. 1 Kourtesis v. Joris, [2007] O.J. No. 5539 (Ont. S.C.J.) 2 see Kourtesis v. Joris, [2007] O.J. No. 2677 (Ont. S.C.J.) 3 Murphy v. Perger, [2007] O.J. No. 5511 (Ont. S.C.J.) 4 Wice v. The Dominion of Canada General Insurance Company, 2009 CanLII 36310 (Ont. S.C.J.) 5 Leduc v. Roman, [2009] O.J. No. 681 (Ont. S.C.J.) 6 Ibid 7 Kent v. Lavadiere, [2009] O.J. No. 1522 (Ont. S.C.J.) 8 see for example: Bishop v. Minchiello, [2009] B.C.J. No. 692 (S.C.J.) and Terry v. Mullowney, [2009] N.J. No. 86) 9 Schuster v. Royal & SunAlliance, 2009 CanLII 58971 (Ont. S.C.J.)

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Opinion/Analysis

Annus Horriblis, The Sequel The last time Canada had a $1-billion-plus cat year was 2005. But now it looks like 2009 will go down as another costly year for cat losses.

Glenn McGillivray

Managing Director, Institute for Catastrophic Loss Reduction (ICLR)

In a January 2006 article published in Canadian Underwriter, “Annus horribilis,” I wrote about the heavy natural catastrophe losses experienced in Canada the year prior — a cool Cdn$1 billion for 2005.The total came largely as a result of the Aug. 19, 2005 deluge in the Greater Toronto Area (GTA), where more than 150 mm of rain fell in just three hours, triggering in excess of $500 million in claims. Other losses in 2005 came from heavy downpours and flooding in Alberta in June (causing an estimated $275 million in insured damage), a tornado in Hamilton in November, and a few other, more minor events. In 2009, the list of losses was a bit longer, though many individual events appear to have flown under the industry’s radar (except, of course, for those companies hit hardest). However one, the Aug. 20, 2009 tornado outbreak, left an indelible mark on many, as the twisters were caught on cellphone video cameras and sent to

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media outlets, and residents of one of Canada’s densest residential areas had to scramble to their basements to seek shelter.

THIS AND THAT, HERE AND THERE As is usually the case, the country was hit by several relatively small events in 2009. Among these was a Feb. 2 snowstorm in Ontario, which caused an estimated $25 million in insured damage, according to Aon Benfield.The Insurance Bureau of Canada (IBC) reported that an F2 tornado in Mont Laurier, Quebec on Aug. 4 caused an estimated $6 million in damage. In the Atlantic provinces, Hurricane Bill caused an estimated $10 million on Aug. 23 and Tropical Storm Danny caused about $25 million on Aug. 29, according to Aon Benfield. Hailstorms in southern Manitoba from Aug. 13 to 15 caused an estimated $50-75 million in damage (mostly crop hail), Aon Benfield says.The Canadian Crop Hail Association commented on Aug. 28 that storms produced hail around Niverville, Hamiota, Lasalle, Starbuck, Brandon, Miniota, Birtle, Somerset, Deloraine, Hartley, Melita, Boissevain, Oak River and Notre Dame De Lordes, and baseball-sized hail hit areas near Lasalle and Brandon, causing 100% crop loss in the heart of the storm.

Eighteen confirmed tornadoes — a record for the most in one day in Canada — tore across Southern Ontario on Aug. 20, resulting in the tragic death of a young boy in Durham and damage to some 600 homes in Vaughan, just north of Toronto. Damage, concentrated largely in Woodbridge and Maple, was widespread, including smashed cars, utility poles and a variety of buildings. IBC pegged the insured damage at more than $76 million, a number that may appear low to many given the perceived size of the event. Tornado outbreaks are not unheard of in Ontario. On Aug. 2, 2006, 17 twisters touched down across parts of south and central Ontario, causing damage mostly throughout cottage country. At that time, it was the highest number of tornadoes for a single event ever in the province, amounting to the equivalent of what Ontario normally sees in one year, according to Environment Canada. And what the media often refer to as the “Barrie Tornado” event in May 31, 1985, actually was comprised of 13 twisters that ripped across parts of southern Ontario late that afternoon.These events, however, pale in comparison to some of the larger outbreaks that have occurred in the United States. On May 2, 1999, 76 tornadoes tore through 18 U.S. states, leaving at least 46 people dead.The largest twister, which was more than 1.6 kilometres wide at times, was also to be the most powerful ever recorded: the F5 tornado had wind speeds clocked at 512 kilometres per hour – strong enough to scour pavement from road surfaces. From Apr. 3-4, 1974, in what is know as ‘The Super Outbreak,’ 148 tornadoes were confirmed in 13 states; and in the second Palm Sunday tornado outbreak of Apr. 11, 1965, 47 tornadoes hit the U.S. Midwest.

ONE-TWO PUNCH Just as occurred in 2005 with the August ‘Freaky Friday’ event in the GTA and the Alberta storms, two events alone caused the lion’s share of the insured damage in 2009. On July 26, 2009 more than 100 millimetres of rain in under three hours inundated parts of Hamilton, Ontario, flooding thousands of basements — particularly in the city’s east end. Aon Benfield notes that providing accurate estimates of insured damage for this event is difficult, since many insurers suffered aggregate damage that fell within their retentions.The reinsurance intermediary estimated insured damage of $100 to $150 million. Other sources have put the range between $200 million and $300 million, and even as high as $325 million.The IBC pegs the damage figure at $196 million.The final numbers may not be known for some time. Just a few days later, from Aug. 1-3, major wind and hail in Alberta caused more than $365 million in insured damage, according to the IBC. Other sources place the

ANNOUNCEMENT

Bryan Yetman, CIP, CRM The Insurance Brokers Association of Ontario (IBAO) is pleased to announce that Bryan Yetman, CIP, CRM has been elected as IBAO’s 67th President. Mr Yetman was officially inducted at the recent IBAO Convention held at The Fairmont Royal York Hotel in Toronto, and formally assumed his role as President on January 1, 2010. With an interest in business, Bryan made the decision to work towards joining the family brokerage in high school. He was accepted into a commerce program at Carleton University in 1994 and moved to Ottawa. A few years into his studies at Carleton, knowing that a career in insurance was in his future, he made a difficult decision to switch from Carleton to a business insurance program at Algonquin College where he graduated in 1998. After graduation, Bryan worked briefly within the brokerage just long enough to establish their computer network between their two locations at which point he joined the financial services commission of Ontario (FSCO). At FSCO Bryan served as an ombudsman officer where he dealt with consumer complaints and tried to bring resolution to disputes. As the market began to harden, Bryan returned to the family brokerage now named First Durham Insurance. First Durham Insurance is located in Pickering, and has a staff of over 30. Obtaining his CIP designation in 2000 and his CRM designation in 2002, Bryan has worked in all areas of the brokerage and became their Vice President and also a Shareholder last year. After becoming involved with the Board and Executive of the Durham Insurance Brokers Association where he served as a Territory Leader for the Young Brokers Council, Bryan made a decision to join the Board of IBAO in 2005 and then moved onto the Executive in 2007. Since joining IBAO, Bryan has chaired a number of committees including the Young Brokers Council, both the members and Education Group of committees, the Group Plans Committee and acted as IBAO’s Admin & Finance Chair. Bryan also sits on FSCO’s Rates and Rules Technical Advisory Committee and Facility Association’s Ontario Operating Committee. “We are thrilled to announce Bryan’s appointment as President to IBAO’s Board,” said IBAO CEO Randy Carroll. “His energy, enthusiasm and dedication are qualities that he exhibits in his personal life and in business. He is not only fully dedicated to the insurance industry but to his clients and community at large.”

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Putting the pieces together.

Events and Seminars Calendar You work hard to protect your clients’ property. Now, it’s time to ensure that you apply the same kind of energy and commitment to your own success. CIP Society Events and Seminars give you the opportunity to learn, to network, to catch up on industry developments and to think about your career.

CIP Society Events and Seminars Toronto – Annual Trends Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .January 26

Ottawa – Leading Insurance Cases 2008 – 09 . . . . . . . . . . . . . . . . . . . . . . . .February 25

Ottawa – Luncheon: Fraud in the 21st Century . . . . . . . . . . . . . . . . . . . . . . . .January 28

St. John’s – Wine & Cheese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March 1

Burnaby – Identity Theft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .January 29

London – The Anatomy of a Liar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March 2

Winnipeg – Directors’and Officers’Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .February 2

Toronto – The Anatomy of a Liar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March 4

Kitchener – Leading Insurance Coverage & Liability Cases 2008–09 . . . . . . .February 10

St. John’s – Curling Bonspiel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March 4

Toronto – Advanced Business Interruption . . . . . . . . . . . . . . . . . . . . . . . . . . .February 18

Kitchener – The Anatomy of a Liar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .March 5

London – CIP Society Volleyball Tournament . . . . . . . . . . . . . . . . . . . . . . . . .February 19 Keeping you at the forefront of the P&C industry. The CIP Society. MEMBERS BENEFIT. www.insuranceinstitute.ca/cipsociety

insured damages from this event in the neighbourhood of $500 million, which would make it the second-most-costly natural catastrophe loss in Canadian history (pushing the Aug. 19, 2005 GTA event to third place). In Alberta, one person was killed and 15 were injured — four critically — when high winds knocked down a stage at the Big Valley Jamboree in Camrose on Aug. 1, 2009. The winds were also blamed for the death of a three-yearold girl in downtown Calgary after corrugated sheet metal fell from a construction site onto a family walking on 9 Avenue SW. Her father and seven-yearold brother were sent to hospital with serious injuries. The strongest reported winds were clocked at 141 km-h at Three Hills and 125 km-h at Red Deer. Subsequently, overnight Sunday and into the wee small hours Monday, vicious

When it comes to large catastrophe losses, timing is everything. A big loss and/or a series of medium and small losses in an already bad year can put companies at risk of insolvency. winds clocked at 107 km-h, lightning and hail wracked Calgary and area, leaving a swath of downed trees, shattered windows and hail damage. According to David Phillips of Environment Canada, hail inside the main zone reached baseball size. In some places, hail measured 10 cm deep. Phillips described the Alberta event as follows: “The nearby town of Carstairs was devastated by the battering large hail. Literally every house in town suffered major hail damage. Some looked like they’d been hit by gunfire with gaping holes left in the siding. Repair crews set up mini-camps nearby to help repair the damage — a job that is not likely to be completed this year. Hail damage stretched from Olds to Bow Island and

was 55 km wide in places. Baseball-size hailstones crunched grain bins and stripped bark off trees, while powerful winds blew over sheds and barns. Some horses and cattle had to be euthanized. The massive hailstorm decimated more than 600,000 ha of Alberta cropland, triggering 1,500 hail crop damage claims. In total, two-thirds of the year’s hail crop losses occurred as a result of the long weekend storm.”

dian Underwriter, July 2007). It is no longer uncommon to experience billion-dollar insured losses from ice storms, hail, tornadoes and wildfires. The second, though less clear, focuses on the issue of what may be called “mini-cats” for lack of a better term. These can be defined as small- to medium-sized events that, while substantial from a loss perspective, fall

TWO CONSIDERATIONS

Due to higher retentions and the shift from proportional to non-proportional reinsurance that took place over the last 10 to 15 years, many reinsurers are picking up a lower proportion of cat losses than they once did.

Two things are worth noting about recent natural catastrophe losses in North America. First, when it comes to such losses, timing is everything.The $2-billion-plus hit that came in 2005 — the big natural catastrophe losses noted above, plus the $1.2-billion, man-made Suncor loss — occurred during a moderately profitable year for the industry, which took in net income of $5.2 billion that year. In comparison, 2009 is shaping up to be a rather weak year for Canadian property and casualty insurers, with only $1.6 billion in profits recorded for the first three quarters. At a presentation of preliminary 2005 industry results made back in early 2006, IBC noted that had the ’05 losses occurred in 2001 (one of the worst years ever for the Canadian property and casualty segment), the industry’s 111% combined ratio would have ballooned to almost 121%, its ROE would have turned negative, from 2.6% to -3.3%, and 64 companies would have recorded a solvency score of under 10%. Hence, a big loss and/or a series of medium and small losses in an already bad year can put companies at risk of insolvency. Second, two trends appear to be emerging vis-a-vis insured losses from natural catastrophes. I have written before about the first: the fact that over the last decade or so, the industry has seen the birth and subsequent rise of $1-billion-plus insured natural loss events that fall outside the realm of earthquake, hurricane and flood (see “The New Normal: Billion-Dollar Bruisers,” Cana-

within insurance company retentions and are therefore taken net on the balance sheet. Several of these in a year (as with 2005 and 2009) can quite severely impact a carrier’s bottom line. Again, if they happen in a weak year for the industry, these kinds of losses can have a negative impact on solvency. On top of all this, due to higher retentions and the shift from proportional to non-proportional reinsurance that took place over the last 10 to 15 years, many reinsurers are picking up a lower proportion of cat losses than they once did. Given the active cat years that Canada has seen as of late, and also taking into account a changing climate that bodes ill for future losses, carriers may wish to think twice about maintaining high retentions. Further, they may wish to consider buying aggregation covers, which are reinsurance agreements that allow insurers to consolidate losses from several events into a single reinsurance claim with one deductible. Under the scenarios noted above, companies need to take a serious look at their reinsurance programs: structuring them the old way may no longer serve them well.

January 2010 Canadian Underwriter 65

MOVES & VIEWS UPCOMING EVENTS: FOR A COMPLETE LIST VISIT

www.canadianunderwriter.ca

AND CLICK ‘MY EVENTS CALENDAR” ON THE HOME PAGE

1

In the most recent Canadian Underwriter online poll, readers were asked: Should insurance companies be allowed to use policyholders’ credit scores as a factor in underwriting auto, home and commercial insurance? The majority, 64.16%, said ‘no,’ while 35.84% of respondents said ‘yes.’

64.16% NO

35.84% YES

2

CNA Canada has appointed Gary Owcar president and chief operating officer. Owcar is responsible for executing profitable growth strategies in the global insurer's Canadian operations. He entered the insurance industry straight from university and began his career in the claims side of the business, progressing through supervisory and management positions. He took on his first international assignment in Brazil for the Chubb Corporation in 1982. Over the next 27 years, he held senior field management positions in Asia, Europe and the United States. He worked with CNA from 1999 to 2006, holding

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senior management positions in the Chicago home office, running global operations and all commercial lines underwriting.

3

Aviva Canada Inc. has posted on YouTube its Top 25 finalists for the first-ever Aviva Community Fund contest. Aviva is putting up $500,000 to help fund ideas that seek to lead, empower and support positive change in Canadian communities. Eight weeks into the online contest, the 25 most popular entries across the country were selected from among more than 2,000 contest entries. A panel of impartial judges will assess the finalists’ ideas based on their feasibility and cost. The winners of the Aviva Community Fund competition will be announced on Jan. 25, 2010. The finalists are included in a YouTube video montage called ‘Meet The Finalists– Aviva Community Fund’ posted at: www.youtube.com/user/avivacommunityfund

4

Cunningham Lindsey has launched Cunningham Lindsey Research Services (CLRS). CLRS provides intelligence gathering, special investigations and surveillance services to assist in the adjudication of insurance claims. “From researching background information

2 and verifying details, to gathering video surveillance and conducting interviews, the services provided by this inhouse unit are done so with an objective perspective of each file,” a Cunningham Lindsey release says. Martin Maylor will serve as director of the unit. He brings more than 20 years experience investigating claims for both life and health and property and casualty industries in Canada, the United States and across Europe.

5

The CIP Society has selected Carla Blackmore as the 2009 recipient of the Greater Toronto Area Fellow of Distinction Award. Blackmore is a retired director of commercial programs with Zurich Canada. The award was created to recognize outstanding achievement in the insurance industry in Toronto. Colleagues nominate insurance professionals for The Fellow of Distinction Award, which is presented annually to a Fellow Chartered Insurance Professional

4

5 (FCIP). Blackmore worked at Zurich for more than 30 years in a number of different capacities, including underwriting, branch and unit management, sales and marketing programs. Outside of Zurich, Blackmore is involved with the Insurance Institute both in the areas of teaching and furthering its reputation, most recently as the chair of the CIP SocietyOntario Council. She is wellknown for her charity work, having been a director of Women in Insurance Cancer Crusade (WICC)-Ontario since 2001 and a co-chair of the Starlight Insurance Gala since 2007. Thanks in part to her donation of personal time and management skills, some $6.4 million has been raised for charity.

MOVES & VIEWS

Appleman has been organizing charitable runs in his local community for the past 28 years. To date, he has helped to raise nearly $1 million.

6a

6

McLarens Canada has announced two executive level appointments. Dennis N. Schembri [6a] has been promoted to executive vice president of Eastern Canada for McLarens Canada. Donald N. Hull [6b] has been promoted to vice president of the Ontario region for McLarens Canada. Schembri has 26 years of experience, having worked as a branch manager for a major independent adjusting firm before founding and operating Vanler Insurance Adjusters Ltd., an Ontario- based independent adjusting firm. Vanler has about 50 employees and offices in Mississauga, Hamilton, Markham, London, Sudbury and Ottawa. McLarens acquired Vanler Insurance Adjusters in September 2007. Schembri will be responsible for assisting the Ontario and Eastern Canada vice presidents in enhancing customer satisfaction and growing their regions. Hull, during his 36-year career, has held director and senior executive

6b positions for an international claims company, both in Canada and internationally. A past president of the Canadian Independent Adjusters’ Association, Hull holds the ‘Chartered Loss Adjuster’ designation. He will be responsible for assisting claims managers, examiners and risk managers in reducing claims losses and optimizing customer satisfaction.

7

The Alberta Insurance Council will award two annual scholarships in insurance education at Grant MacEwan University and the University of Calgary. Both schools offer programs to students planning a career in insurance and will determine the award recipients. Both students will receive $2,000 to go towards their studies in their chosen insurance program.

8

CARSTAR owners Paul Appleman of Port Hope and Dennis Carlini of Windsor each carried the Olympic torch in the Vancouver 2010 Torch Relay.

9

Aviva Canada will interface its broker portal with Applied Systems’ WARP to allow brokers easier access to the insurer’s portal. The new functionality is now available for all Aviva personal lines business transacted in Ontario, Western Canada and Atlantic Canada regions. By interfacing with WARP, “Aviva is giving its broker partners who use TAM (the Agency Manager) quick and easy access to its portal,” an Aviva release says. WARP is “a bridging solution” that connects users of TAM to insurance company systems. For the Aviva implementation, the WARP technology connects brokers to the Aviva Portal and the Aviva Document Management System, where they can process policy inquiries and manual endorsements.

10

The Insurance Brokers of Ontario (IBAO) and the Ontario Minor Hockey Association (OMHA) have teamed up for the 2009-10 hockey season to sponsor the OMHA Participant Guide. “IBAO is extremely proud and delighted to support the OMHA and the publishing of

this annual participant guide,” IBAO CEO Randy Carroll said in a release. “Our broker members understand very clearly the value of developing skills and perfecting strengths in order to be true professionals and ultimately be the best in all you do. That’s why we believe the OMHA Participant Guide is an excellent tool to better educate hockey parents and players and assist them with understanding the many facets of the game of hockey and community.”

11

A new application by Summit Mobile Services provides users with access to services required if they are ever involved in an accident. Help I Crashed My Car provides the user with a oneclick, automated emergency communication system that contacts up to three family members or friends, the insurance company, the insurance agent and the preferred body shop. It will even send the body shop a map of the accident location using GPS location technology. The application also provides an accident report and the ability to take photos at the scene of the accident, which can be sent to the insurance company and body shop. The application is currently available for download, according to a spokesperson at Summit Mobile Solutions, Inc.

January 2010 Canadian Underwriter

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Lombard Canada

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Winmar Toronto opened its doors for its grand opening on Oct. 28, 2009. Guests were treated to live music, food and a tour of the newest Winmar location. Winmar Toronto is located at 9 Meteor Drive.

Fabian Richenberger President Lombard Canada Mark Ram, Chairman of the Board of Directors of Lombard Canada, is pleased to announce the appointment of Fabian Richenberger to the position of President of Lombard Canada. Fabian joined the parent company of Lombard Canada – Northbridge Financial Corporation – in May 2009 to lead the group-wide distribution management function for the Northbridge Group of Companies. Prior to joining Northbridge, Fabian held senior executive positions with Zurich Financial Services in Canada, the US and Europe, including Chief Underwriting Officer, Chief Marketing & Sales Officer, and Head of Planning and Operational Management. Fabian holds an Executive MBA from the Rotman School of Management at the University of Toronto and a Federal Degree in Economics and Business Administration from the Business School of Zurich in Switzerland. Under Fabian’s leadership, Lombard will continue its long-standing tradition of developing innovative and progressive solutions for its customers and key distribution partners. Lombard Canada is a wholly owned subsidiary of Northbridge Financial Corporation. Canadian owned and operated, Lombard Canada consists of Lombard General Insurance Company of Canada, Lombard Insurance Company and Zenith Insurance Company and generates gross annual premiums of close to $900 million through its more than 700 employees located across Canada.

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Canadian Underwriter January 2010

APPOINTMENT

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

More than 400 attended Women in Insurance Cancer Crusade (WICC) Ontario’s 12th Annual Breakfast for Cancer on Nov. 4, 2009 at the Arcadian Court in Toronto. Guest speaker Lauren Donnelly described her traumatic experience and battle with cancer. As a healthy and active 15-year-old, she was diagnosed with Acute Lymphoblastic Leukemia. Today Lauren is studying journalism at Ryerson University and is passionate about helping children and teens through their cancer trauma. She is working with The Childhood Cancer Foundation to launch a social networking Web site for teens diagnosed with Cancer called ‘Teen Connector.’

Gary Owcar

CNA Canada is pleased to announce the recent appointment of Gary Owcar as president and chief operating officer. In this new role, Mr. Owcar will be responsible for executing profitable growth strategies in the global insurer’s Canadian operations. Owcar entered the insurance industry straight from university and began his career in the claims side of the business progressing through supervisory and management positions. In 1982 he took on his first international assignment in Brazil for the Chubb Corporation. Over the next 27 years he held senior field management positions in Asia, Europe and the U.S. In his last tour of duty with CNA from 1999 to 2006, he held senior management positions in the Chicago Home Office, running global operations and all commercial lines underwriting. CNA is one of the world’s leading insurers with over 100 years of experience and $7.8 billion in revenues. It provides insurance protection to more than one million businesses and professionals in North America and internationally. Headquartered in Chicago, CNA has offices throughout Canada, the U.S., and Europe.

January 2010 Canadian Underwriter

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

More than 100 guests attended the 30th anniversary celebration of PremièreAction (formerly ROSCO group), a division of FirstOnSite, in Montreal on Oct. 29, 2009. The event celebrated three milestones: the name change from Rosco Group to Premiere Action; a 30th anniversary; and the completion of a new office complex and operational centre. Guests were treated to live entertainment, gourmet food, a martini bar and more. The event was held at the new offices in Dorval, Quebec.

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GALLERY

APPOINTMENT

See all photos from this event at www.canadianunderwriter.ca/gallery

Dennis Schembri Michael Holden, President and CEO, McLarens Canada, is pleased to announce that Dennis N. Schembri CIP, CFEI has been promoted to Executive Vice President, Eastern Canada. In his 29-year career, Mr. Schembri worked as a branch manager with a major independent adjusting firm and later founded and operated Vanler Insurance Adjusters Ltd, an Ontario-based independent adjusting firm with approx 50 employees and offices in Mississauga, Hamilton, Markham, London, Sudbury and Ottawa. Mr. Schembri joined McLarens Canada when Vanler was acquired by McLarens in September 2007. Reporting to Mr. Holden, Mr. Schembri will be responsible for assisting the Ontario and Eastern Canada Vice Presidents in enhancing customer satisfaction and growing their regions. Since 1976 McLarens Canada has provided claims handling, third party administration and risk management services to local, national and international markets, risk managers, brokers and public entities. McLarens Canada serves its clients from 44 offices located in all provinces across Canada and internationally from 340 offices in 83 countries. McLarens Canada is a member of Granite Global Solutions (GGS). GGS is Canada’s leading risk mitigation company, offering independent adjusting, private investigation, disability management, structured settlement and forensic engineering services to corporate, legal, insurance and government clients.

Global Claims Management

Professionals on your Team

TM

www.mclarens.ca

January 2010 Canadian Underwriter

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GALLERY

More than 200 industry members attended the Toronto Insurance Conference (TIC)’s 54th Annual Black Tie Dinner on Nov. 21, 2009 at the Four Seasons Hotel in Toronto. TIC President Brian Wilcox introduced the evening’s guest speaker, Andrew Coyne, national editor of Maclean’s Magazine. Coyne provided the audience with his outlook on today’s political and economic issues.

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

January 2010 Canadian Underwriter

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GALLERY

CARSTAR Automotive Canada Inc. kicked-off its ‘Sweet 15th Anniversary Celebration’ with its annual charity CARSTAR Casino Night Gala on Nov. 20, 2009. Held at Carmen’s in Hamilton, Ont., the gala raised funds for the Canadian Cystic Fibrosis Foundation (CCFF). More than 700 insurance and vendor partners, employees and friends attended. Hamilton Tiger Cats kicker Nick Setta played host for the evening, which was themed ‘La Dolce Vita – The Sweet Life.’ Canadian musician Suzie McNeil added a live performance to the mix. McNeil played several of her hits, including ‘Believe’ which was chosen as the theme for the 2010 Winter Olympics. CARSTAR president and CEO Sam Mercanti presented a cheque to the CCFF worth more than $100,000, raised through CARSTAR’s 2009 fundraising efforts. To date, CARSTAR has raised more than $1.7 million to fund research and treatment in the fight against CF.

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GALLERY

APPOINTMENT

See all photos from this event at www.canadianunderwriter.ca/gallery

John Tagle Senior Vice-President, National Sales and Business Development Larry Shumka, President & CEO of SCM Insurance Services, is very pleased to announce the appointment of John Tagle to the position of Senior Vice-President, National Sales and Business Development, ClaimsPro, an SCM Company. “Our past acquisitions and the recent integration of two claims management networks into a single entity has resulted in our becoming the largest independent adjusting firm in Canada. Our breadth of services and scale of operations across Canada has thrust us into a position of leadership. The establishment of John's new role is in response to this leadership challenge." explains Mr. Shumka. John will be responsible for the augmentation of strategy and implementation of plans to ensure that ClaimsPro continues to be on the forefront of developing positive business relations with our national customers. His focus will include continued growth in the Property & Casualty market sector, Broker driven Commercial Programs and Corporate Canada. John will be leading Sales and Business Development nationally. He will be backed by a very strong, diverse, energetic group! The role of Senior Vice-President, National Sales and Business Development, builds upon an already accomplished career. John has held a number of senior management and executive level positions with focuses on vendor relations & partnerships, within the insurance industry. Prior to entering the industry, he held a position in International Business Development for a Canadian software company working throughout the United States, Southeast Asia, and Australia. His proven track record and experience in developing claims management solutions, call centre applications and vendor programs led him back to the insurance industry in 2007, when he was on-boarded with ClaimsPro. For more information on National Sales and Business Development at ClaimsPro please contact John directly. SCM Insurance Services is Canada's largest independent supplier of claims management services. Established in 1986, SCM's commitment to innovative technology, expert staff, and solid customer service, has allowed us to grow from a single office to a national company.

www.scm-claimspro.ca January 2010 Canadian Underwriter

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GALLERY

SCM Risk Management Services (RMS) officially unveiled its new insuranceto-value (ITV) indexing technology at a reception at the MaRS Innovation Centre in Toronto on Nov. 23, 2009. Dubbed ‘iClarify,’ the RMS indexing tool has been developed to help resolve the ITV issue. SCM Risk Management Services partnered with the Insurance Brokers Association of Ontario in developing the RMS indexing tool and The Economical is a funding partner. Through iClarify, Ontario brokers will be able to access streetscape photographs, overview satellite images, claims history (from CGI) and neighbourhood profile data of Canadian homes. Using this data, brokers will be able to validate input from consumers regarding construction type, square footage, year built, interior and exterior finishes, etc.

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Canadian Underwriter January 2010

GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Medical people producing medical reports

Independent Assessments Of Physical And Mental Capabilities TORONTO • HAMILTON • OSHAWA • OTTAWA • HALIFAX • CALGARY • VANCOUVER T E L : 4 1 6 - 5 9 9 - 5 9 9 1 • FA X : 4 1 6 - 5 9 9 - 1 5 3 0 • AC R O S S C A N A DA : 1 - 8 0 0 - 4 8 3 - E X A M ( 3 9 2 6 )

ISO-9001:2000 REGISTERED Serving You Since 1989

www.riverfrontmed.com

E-mail: info@riverfrontmed.com January 2010 Canadian Underwriter

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Belron held the Canadian final of the ‘Best Of Belron’ windshield repair and replacement competition in Laval, Quebec on Nov. 19, 2009 . The event was a lead-up to the international competition in Paris in 2010. Belron’s Top 3 Canadian technicians went head-to-head under the watchful eye of judges from across Canada. First place went to Francisco Jarquin (Montreal), who finished ahead of two other seasoned company technicians, Ken Buie (West) and Dave Framst (Maritimes/ Ontario).

WORLD LEADERS IN POST-COLLISION CARE AT OUR COLLISION REPORTING CENTRES (CRC)

SAVE ON YOUR CUSTOMERS: • CAR RENTAL • REPAIR COSTS • SECONDARY TOW FEES • ADMIN COSTS

WE PHOTOGRAPH EVERY VEHICLE AT THE CRC! INTERNET PORTAL ALLOWS MEMBER INSURERS INSTANT ACCESS TO POLICYHOLDERS LIVE COLLISION DATA VIEW YOUR CLIENTS INFO IMMEDIATELY THROUGH YOUR DESKTOP WEB PORTAL TO CROMS LEARN WHERE, WHEN & WHY COLLISIONS ARE OCCURRING THRU CROMS ANALYTICS – COMPARE YOUR RESULTS AGAINST THE ENTIRE INDUSTRY! Introducing CROMS MOBILE – now police can generate CROMS Collision Reports RIGHT AT THE SCENE, getting you your neat, legible official collision reports FASTER!

Insurance Companies are Realizing Immediate Benefits… IS YOURS?

Call us today 1-877-895-9111 or visit www.accusupport.com Under contract with 27 Police Jurisdictions Throughout Ontario. 78

Canadian Underwriter January 2010

ADVERTISERS’ INDEX Accident Support Services International Ltd. ACE INA Insurance Applied Systems Canada Inc. The ARC Group Canada Inc. Assured Automotive The Boiler Inspection & Insurance Company of Canada ClaimsPro – An SCM Company CNA Collision Solutions Network (CSN) Crawford & Company (Canada) Inc. Cunningham Lindsey Canada The Economical Insurance Group FirstOnSite Restoration Giffin Koerth Smart Forensics Gilbertson Davis Emerson LLP The Guarantee Company of North America Great American Insurance Group Insurance Brokers Association of Ontario (IBAO) i-hire.ca instouch.com Insurance Institute of Canada Intact Insurance Lombard Canada Ltd. McLarens Canada Ontario Insurance Directory (2010) ORIMS P.C.A. Adjusters Limited PolicyWorks Quelmec Loss Adjusters RIMS 2010 Conference, Boston Riverfront Medical Services ServiceMaster WICC WINMAR

78 7 51 37 47 82 75, 79 29, 69 13 15 9 19 22, 23 5 41 17 83 (IBC) 63 57 55 2 (IFC), 25, 43, 64 84 (OBC) 68 35, 71 39 81 21 31 59 45 77 44 49, 53 27

APPOINTMENT

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SCOR took over the Rosewater Room in Toronto on Nov. 19, 2009 to celebrate the release of the 2009 Beujolais Nouveau wines. Industry guests were treated to samples of the new wines, a delicious spread of food and the chance to catch up and mingle with one another.

Ian Alexander B.Sc Larry Shumka, President & CEO of SCM Insurance Services together with Bill Moorman, Senior Vice

President (Central Region), ClaimsPro, is pleased to announce that Ian Alexander B.Sc has joined ClaimsPro's Special Risks Division (SRD). Ian is a nationally renowned claims specialist whose technical skills are outshone only by the personal and professional standards in which he takes considerable pride. In an insurance career spanning twenty five years, Ian, a graduate of the University of Winnipeg’s Physics program, brings a skill set ranging from Amusement Liability to Commercial Property and Casualty claims as well as Pharmaceutical Malpractice and Directors E&O. Ian’s skills are punctuated by his investigative acumen and deep knowledge of a variety of complex policies as well as his expertise in coverage interpretation. Ian has worked as a company adjuster but his love of variety has kept him in the independent role for the past 8 years. His claims career includes the position of National Claims & Loss Prevention Manager with Risk & Loss Prevention Engineering responsibilities, Control Adjuster for several major accounts and Branch Manager for a national IA company. Ian’s historic focus on client service and commitment to quality in his home town of Winnipeg will serve him well as we expand our SRD unit to offer geographical coverage in the Manitoba area. As part of ClaimsPro’s Special Risks Division (SRD) Ian joins a team comprised of highly experienced Executive General Adjusters (EGAs) and General adjusters (GAs) who are located in Dartmouth, Montreal, Toronto, Calgary and Vancouver and other key geographic areas throughout Canada. ClaimsPro SRD focuses on the handling of Commercial claims in a variety of disciplines including Industrial, Oil & Gas (Energy), Directors & Officers and Errors & Omissions for local, national and international insurance clients and markets. For more information on the Special Risk Division, please do not hesitate to contact, in Eastern Canada, mailto: michel.girard@scm.ca Michel Girard or in Western Canada, mailto: michael.buzzeo@scm.ca" Michael Buzzeo.

www.scm-claimspro.ca January 2010 Canadian Underwriter

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GALLERY

The Ontario Pond of the Honourable Order of the Blue Goose hosted its annual Christmas Galabration on Dec. 3, 2009. More than 100 ganders and guests attended. The event was held at Liberty Group’s newly renovated Ciao Wine Bar in Toronto’s trendy Yorkville area. Cocktails and a fabulous meal followed a performance by Terri Oliver and her band, Oliver Sole.

FOR SALE

Waterfront Home, Amherst Island Tranquil Amherst Island, ON, home of ‘The Owl Woods’. Stop-over for birds on major migration route during the spring/fall.

s 1UALITY CUSTOM BUILT BEDROOM BATHROOM HOME ON ACRES OF PRIME ,AKE /. WATERFRONT s 'OURMET KITCHEN WITH ISLAND HEARTH ROOM

GREAT ROOM WITH CEILING &INISHED W O BASE MENT WITH LARGE REC AREA PLUS ADJOINING ROOMS s 7ONDERFUL LARGE HOME FOR FAMILY FRIENDS GROUPS

ENTERTAINING OR " " s %NJOY BREATHTAKING YEAR ROUND WATERFRONT SUNSETS FROM THE GREAT ROOM OR THE LARGE @%ON DECK OR FROM THE OF PRIVATE LEVEL SHORELINE

#YCLING SAILING HIKING BIRD WATCHING ISLAND NATURE WILDLIFE EXPLORING LOCAL ARTISTS AND MUCH MORE SEE www.amherstisland.on.ca FOR )SLAND INFO To inquire further, please contact: Dunreath.Thompson@sympatico.ca or phone Robert at 905-355-5998

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GALLERY See all photos from this event at www.canadianunderwriter.ca/gallery

Now it’s back to our series of “Did You Know” facts and figures about the Ontario chapter of RIMS. Next up ... AWARDS and RECOGNITION!

••••••••••••••••••••••••••••••••••••••••••

ORIMS Member winners of the Harry & Dorothy Goodell Award recognizing outstanding lifetime achievement in the field of Risk Management: • • • •

1980 - Daniel E. Sullivan 1982 - Douglas Barlow 2001 - Donald M. Stuart 2005 - Susan Meltzer

ORIMS Member winners of the Richard Bland Award recognizing outstanding contribution in the field of legislation: • 1975 - Donald M. Stuart • 1993 - Lloyd Hackett ORIMS Member winners of the Arthur Quern Quality Award acknowledging individuals and organizations that develop innovative products, processes, programs, systems, services or enterprise risk management solutions that serve to raise the quality of the industry: • 2005 - ORIMS Corporate Member - TSSA (Technical Standards and Safety Authority) for its risk-based inspection model And finally, we are proud to remind you that these ORIMS Members have represented us well as Past Presidents of RIMS: • • • • •

1971 - 1972 1975 - 1976 1993 - 1994 1999 - 2000 2004 - 2005

Douglas Barlow Daniel E. Sullivan J.A. “Tony” Bridger Susan R. Meltzer Nancy L. Chambers

www.ontario.rims.org

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The Boiler Inspection & Insurance Company of Canada

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Hughes Amys LLP started spreading the holiday cheer early this year, hosting its annual holiday party at Six Steps Restaurant Lounge in Toronto on Nov. 25, 2009. In addition to delicious fare and hospitality, industry guests and attendees were treated to ‘contagious smiles’ and encouraged to spread the cheer!

Derrick Hughes Assistant Vice President Hans A. Schols, President & Chief Executive Officer and the Board of Directors of The Boiler Inspection and Insurance Company (BI&I) are pleased to announce that Derrick Hughes is appointed Assistant Vice President, Reinsurance Assumed. Mr. Hughes joined BI&I in 1995. He has most recently served as Director, Client Company Marketing, Advertising and Business Development Strategy for BI&I. Mr. Hughes holds a Bachelor of Arts degree from Trent University, is a Fellow Chartered Insurance Professional and has his Canadian Risk Management designation. BI&I is Canada’s leading equipment breakdown insurer. BI&I helps industrial and commercial clients reduce risk through a unique combination of specialty insurance, engineering-based risk management and loss control services.

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Construction

is the largest industry segment served by Great American’s Property & Inland Marine Division, but our support doesn’t end with Builders Risk and Contractors Equipment. We have expertise in Motor Truck Cargo, Property, Special Floaters — and more!

Property & Inland Marine For more information call 416.368.8200 330 Bay Street, Suite 800 I Toronto, ON M5H 2S8

The Property & Inland Marine Division of Great American Insurance Company / Canadian Branch Great American Insurance Group I GreatAmericanInsurance.com Scotia Plaza, Suite 2100 I 40 King Street West I Toronto, ON M5H 3C2

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